[2014-07-17] Bitcoin regulation in state of New York is announced.

[howardb]

http://www.marketwatch.com/story/bitcoin-regulations-proposed-by-new-york-state-2014-07-17?siteid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20marketwatch%2Fmarketpulse%20%28MarketWatch.com%20-%20MarketPulse%29

[BTCIndia]

Detailed Document:
http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf

[runam0k]

Exactly what people were expecting, I think - certainly no worse and it provides some certainty going forward.

Additionally, DFS is today immediately publishing a copy of the regulations on the website Reddit.

Reddit gets a mention - go Reddit!

[DeathAndTaxes]

A direct link to the proposed regs:
http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf

A Person already engaged in Virtual Currency Business Activity must apply for a license in accordance with
this Part within 45 days of the effective date of this regulation. In doing so, such applicant shall be deemed in
compliance with the licensure requirements of this Part until it has been notified by the superintendent that its
application has been denied, in which case it shall immediately cease operation in this state. Any Person
engaged in Virtual Currency Business Activity that fails to submit an application for a license within 45 days of
the effective date of this regulation shall be deemed to be conducting unlicensed Virtual Currency Business
Activity.

So businesses have 45 days from the effective date to comply but the effective date hasn't been stated.  Forwarding a copy to counsel.

[DeathAndTaxes]

This section is not surprising

Records of non-completed, outstanding, or inactive Virtual Currency accounts or transactions shall be
maintained for at least five years after the time when any such Virtual Currency has been deemed, under the
Abandoned Property Law, to be abandoned property.

Three guesses for who takes ownership of abandoned property.  Five years from now the state of NY could be an owner of Bitcoins.  At least they made it five years.   Some states considered prepaid credit cards to be abandoned property after just two years.

[DeathAndTaxes]

A quick reading didn't find anything particularly unusual.  One nice provision is the regulatory is required to approve or deny an application within 90 days.   This is one of the problems with state MT licenses in that it can take months or years (plural) to obtain all licenses.  The devil is in the details however and key points such as the application fee and annual license fee are "to be determined".

[BitCoinDream]

A quick reading didn't find anything particularly unusual.  One nice provision is the regulatory is required to approve or deny an application within 90 days.   This is one of the problems with state MT licenses in that it can take months or years (plural) to obtain all licenses.  The devil is in the details however and key points such as the application fee and annual license fee are "to be determined".

So, to run a Bitcoin business from NY, one needs to secure explicit license ?

[franky1]

This section is not surprising

Records of non-completed, outstanding, or inactive Virtual Currency accounts or transactions shall be
maintained for at least five years after the time when any such Virtual Currency has been deemed, under the
Abandoned Property Law, to be abandoned property.

Three guesses for who takes ownership of abandoned property.  Five years from now the state of NY could be an owner of Bitcoins.  At least they made it five years.   Some states considered prepaid credit cards to be abandoned property after just two years.

RECORDS

the key word. RECORDS need to be kept for 5 years after the business has deemed that the customer has abandoned their account (inactive login)

it is the business that sets the policy of what they deem as abandoned and the business sets the policy to keep proceeds deemed as abandoned.

then the business has to keep records for 5 years to allow customers to re-acquaint themselves with the company for an amicable agreement to retrieve funds, or seek a court order. if the business fails to return funds by pretending they have no records the business is liable.

after this period. usually its the business that keeps it as its under their 'trust'

[Melbustus]

A quick reading didn't find anything particularly unusual.  One nice provision is the regulatory is required to approve or deny an application within 90 days.   This is one of the problems with state MT licenses in that it can take months or years (plural) to obtain all licenses.  The devil is in the details however and key points such as the application fee and annual license fee are "to be determined".

Agreed, though I would like to see further detail in section 200.9(a), eg; what are the bonding amounts, how are they determined, who can issue them, etc... Bonding has been a major impediment to getting state-by-state MT licensing for bitcoin companies thusfar; I'd like for this new BitLicense to resolve that issue.

[howardb]

No matter what the content, this is a Major milestone on the road to legitamacy for bitcoin, i'm amazed the price has not reacted more than it has. Perhaps word is slow to leak out, though it's been mentioned on CNBC already, interviews with the guy later today also.

[Melbustus]

200.3 c 2 is nice and clear:

(c) Exemption from licensing requirements. The following Persons are exempt from the licensing requirements otherwise applicable under this Part:
...
(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services

Yeah, this is key. The regs overall basically formalize, into a Virtual-Currency specific charter, what is already required to comply with existing AML/KYC/BSA regs for money-transmitting/exchanging businesses. Thus, the uncertainty is removed, but nothing *really* changes; however, the explicit assurance that consumers and merchants are free to transact without regs is huge - that's really the only avenue a western gov would likely use to attack/constrain bitcoin, so the explicit carve-out is very nice.

[DeathAndTaxes]

the business sets the policy to keep proceeds deemed as abandoned.

That is not correct.  In most states (NY is one of them) after the property is deemed abandoned the business must turn the property over to the state.  Businesses can not just legally keep abandoned property unless it is exempt property and by the regs virtual currencies won't, at least not in NY.

after this period. usually its the business that keeps it as its under their 'trust'

No after the property is abandoned, the state takes ownership pending a claim from the original owner.

[DeathAndTaxes]

200.3 c 2 is nice and clear:

(c) Exemption from licensing requirements. The following Persons are exempt from the licensing requirements otherwise applicable under this Part:
...
(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services

Yeah, this is key. The regs overall basically formalize, into a Virtual-Currency specific charter, what is already required to comply with existing AML/KYC/BSA regs for money-transmitting/exchanging businesses. Thus, the uncertainty is removed, but nothing *really* changes; however, the explicit assurance that consumers and merchants are free to transact without regs is huge - that's really the only avenue a western gov would likely use to attack/constrain bitcoin, so the explicit carve-out is very nice.

That isn't exactly true.  At the federal level FinCEN has provided guidance that the exchange of virtual currency constitutes money transmission under federal law and thus entities must register as a MSB with FinCEN.  FinCEN's "guidance" is actually very poor and contradicts existing guidance (exchanging USD for EUR is not money transmission).   It would have been preferable for FinCEN to do as NY has done and create a new regulated class (or expand "currency exchanger" to cover virtual currencies).  They didn't and what is done is done.  Still FinCEN's guidance doesn't apply to state regulations.  They opened the box and created a huge amount of uncertainty.

No two states even share the same definition of "money transmission" or "money" at the state level and thus the applicability of existing money transmitter regulations on entities that exchange virtual currency for real currency is a huge legal gray area.  Only a few states have provided any public information on the applicability of existing regulations.  In some states existing regs could apply although that probably won't be certain until after some court decisions.  In other states due to the wording it is highly unlikely that the existing regulations could cover virtual currency exchangers without a modification of the statute.  This is going to take years if not decades to play out.

[DeathAndTaxes]

A quick reading didn't find anything particularly unusual.  One nice provision is the regulatory is required to approve or deny an application within 90 days.   This is one of the problems with state MT licenses in that it can take months or years (plural) to obtain all licenses.  The devil is in the details however and key points such as the application fee and annual license fee are "to be determined".

Agreed, though I would like to see further detail in section 200.9(a), eg; what are the bonding amounts, how are they determined, who can issue them, etc... Bonding has been a major impediment to getting state-by-state MT licensing for bitcoin companies thusfar; I'd like for this new BitLicense to resolve that issue.

Agreed.  It would be also helpful if states could work together and form a multi-state license with a single bond.  Still other non-Bitcoin MSBs have been fighting this fight for the better part of three decades with little progress so the chances of that are slim.

[Melbustus]

200.3 c 2 is nice and clear:

(c) Exemption from licensing requirements. The following Persons are exempt from the licensing requirements otherwise applicable under this Part:
...
(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services

Yeah, this is key. The regs overall basically formalize, into a Virtual-Currency specific charter, what is already required to comply with existing AML/KYC/BSA regs for money-transmitting/exchanging businesses. Thus, the uncertainty is removed, but nothing *really* changes; however, the explicit assurance that consumers and merchants are free to transact without regs is huge - that's really the only avenue a western gov would likely use to attack/constrain bitcoin, so the explicit carve-out is very nice.

That isn't exactly true.  At the federal level FinCEN has provided guidance that the exchange of virtual currency constitutes money transmission under federal law and thus entities must register as a MSB with FinCEN.  FinCEN's "guidance" is actually very poor and contradicts existing guidance (exchanging USD for EUR is not money transmission).   It would have been preferable for FinCEN to do as NY has done and create a new regulated class (or expand "currency exchanger" to cover virtual currencies).  They didn't and what is done is done.  Still FinCEN's guidance doesn't apply to state regulations.  They opened the box and created a huge amount of uncertainty.

No two states even share the same definition of "money transmission" or "money" at the state level and thus the applicability of existing money transmitter regulations on entities that exchange virtual currency for real currency is a huge legal gray area.  Only a few states have provided any public information on the applicability of existing regulations.  In some states existing regs could apply although that probably won't be certain until after some court decisions.  In other states due to the wording it is highly unlikely that the existing regulations could cover virtual currency exchangers without a modification of the statute.  This is going to take years if not decades to play out.

Agreed that a federal framework which supercedes states regs would've been preferable....but as you note, that ship sailed already.

On another note, Reddit seems very upset with these regs: http://www.reddit.com/r/Bitcoin/comments/2aycxs/hi_this_is_ben_lawsky_at_nydfs_here_are_the/

A couple valid points made (I'll have to read the regs closer to verify) are:
1) Entities like changetip would fall under this licensing
2) Companies must hold profits and retained earnings in dollars, not bitcoin.
3) Alt-coin exchanges fall under the regs.

I hope the above, plus the bonding issue, are addressed/contested strongly during the 45-day comment period. Also, one thing that would've been nice to see, and which can maybe be addressed in the comments period, is a scaling-up of regulatory burden with increase in business activity (ie, Fred Wilson's "on ramp" suggestion during the hearings in Feb) instead of the regs fully applying to all from day 1.

[BittBurger]

Regarding Reddit:

Everyone there is pissed.

Was nice to see some more rational conversation here.  Usually the other way around LOL

-B-

[Cicero2.0]

This actually doesn't seem too bad after a cursory reading. It could have been much worse. The specifics on merchants not needing a license is a very good thing.

[DeathAndTaxes]

The #2 above is particularly distressing.  I can't understand how they would enforce that or why they would want to.  For a company like ours, holding a reserve of virtual currency is a requirement.  From an accounting point of view it does absolutely nothing except make bookkeeping.  Ok book earnings as USD, then use those earnings to buy BTC to increase the operating reserve.  The requirement is just regulation for regulation sake.

[counter]

I can't say I'm a huge fan of the regulations honestly.  It's is not how I'd prefer to see businesses starting to accept BTC.  There isn't a real valid reason why customers would need to identify themselves with a BTC address when conducting business.  You don't do that with cash.

[DannyElfman]

200.3 c 2 is nice and clear:

(c) Exemption from licensing requirements. The following Persons are exempt from the licensing requirements otherwise applicable under this Part:
...
(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services

This is great at it gives businesses more certainty regarding AML and other reporting requirements. It makes things very black and white.