Earlier this week, we reported that Poloniex, Kraken, and Bitfinex had terminated services in New York because of the state’s controversial BitLicense. Now more Bitcoin companies have announced plans to cease operations in the state.
LocalBitcoins.com – a Finnish-based peer-to-peer Bitcoin trading service – stated in a blog post published Wednesday that New York residents would no longer be able to use the service because of BitLicense.
“As the BitLicense is time consuming, expensive and difficult to obtain for anything but large companies we’ve taken the decision to protect our US based traders and not allow New York based users to our services,” the company said.
LocalBitcoins added, “This is an unfortunate state of affairs and we hope that the regulation will in the future accommodate small time bitcoin sellers who do not have the possibility to comply with regulations made for big financial institutions.”
Another P2P Bitcoin trading platform, BitQuick, announced Tuesday that New York users would no longer be able to buy or sell on the platform. The company said the move was “a direct result of the extensive regulations introduced by the recent implementation of the BitLicense.”
BitQuick said in a press release that to better inform consumers about the issue, it is redirecting New York consumers to PleaseProtectConsumers.org, an initiative whose participants also include ShapeShift, GoCoin, and HolyTransaction.
“$5,000 for a new startup is a deep expense,” said BitQuick founder Jad Mubaslat in the press release, referring to BitLicense’s $5,000 non-refundable application fee.
Mubaslat added, “When you’re talking about many companies who are in pre-seed stages, they don’t even stand a chance to try. New York isn’t a problem now; we’ll have to wait for them to come around. But if other states followed suit, there would be a serious chokehold on innovation. Innovators would flee to unrestricted states or territories. Not to mention the state by state regulatory framework in place right now is a mess to begin with.”
The company said in the release that BitLicense is overbearing relative to the size of the Bitcoin sector, as well as indiscriminate toward small and larger startups. BitQuick pointed to security concerns, as consumers would be put at risk with various companies being required to maintain comprehensive records of their customers.
Hashpower provider Genesis Mining announced on its corporate blog Wednesday that it would not be able to comply with the regulations outlined in BitLicense and therefore cannot accept customers from New York state. The company said all current customers will be able to continue their services, but going forward, no one with a New York state IP address will be able to buy hashpower contracts with Genesis Mining.
“While advocates for the BitLicense say they want to protect consumers, what the act really does is stifle innovation. It’s complex, expensive, and comes with a set of guidelines that make it nearly impossible for any startup to comply with,” said the company in the blog post.
Genesis Mining added, “We stand by the cryptocurrency community and believe this particular piece of legislation is unnecessary and is an obstacle to free market innovation. We also believe that is exactly what it set it out to do. Companies across the world today posted similar announcements about leaving New York, and while it may seem like a victory to those who passed it, it is important to understand the difference between winning a battle and winning a war. Those who passed this bill have only succeeded in winning a small battle, and as a result have set their state further behind.”
Bitcoin is here to stay and there is nothing anyone can do to stop it, the company affirmed.
Backpage has apparently stopped accepting Bitcoin from New York users. A picture posted on Imgur and shared on Reddit shows that the Bitcoin payment option for the online classifieds has been temporarily restricted for New York residents due to BitLicense.
Meanwhile, the New York State Department of Financial Services (NYDFS) revealed to CoinDesk that is has so far received 22 applications from companies looking to engage in digital currency business activity in New York.
The information follows the August 8th filing deadline for firms previously offering such services to New York consumers, and does not include companies that have applied for banking charters.
Matt Anderson, NYDFS deputy superintendent for public affairs, told CoinDesk that the department believes this filing total indicates there is “substantial interest” in complying with BitLicense.
Responding to criticism of the regulations, Anderson said the department believes BitLicense will eventually lead to broader adoption of the technology by companies and consumers.
“In the long term, we think this is going to be helpful and I think there’ll ultimately be some sort of shaking the wheat from the chaff,” said Anderson to CoinDesk. “We think that those companies that want to do business with strong consumer protections and strong regulatory requirements will continue to submit applications.”
Anderson said businesses that have since ceased operations in the New York market will be able to apply at a later date if they wish to comply with BitLicense.
Among the companies that have applied for a BitLicense is Coinsetter, a global Bitcoin exchange which CoinReport profiled last fall.
The New York-based company, which acquired Canadian Bitcoin exchange CAVIRTEX earlier this year, said in a corporate blog post published Tuesday that it is now authorized to legally service New York customers during the BitLicense application review process and residents of the state are welcome to open an account with the exchange.
The company said the move highlights its commitment to providing sustainable coverage to New York customers. “While we serve a global user base of bitcoin trades, New York has long been Coinsetter’s home,” said CEO Jaron Lukasiewicz in the blog post. “We are happy to announce that Coinsetter will continue to be headquartered in New York City, a global capital of banking and financial technology, and to serve customers throughout New York State.”
Lukasiewicz added, “While sometimes a controversial topic in our industry, regulatory licensing is a requirement for bitcoin exchanges in some states. Fulfilling our licensing requirements plays an important role in providing sustainable service to customers over the long term. Some exchanges have decided to discontinue operations in New York. We will take a more difficult path in order to make sure New York residents continue to have a high quality bitcoin exchange available to them.”
Meanwhile, Bitcoin wallet provider Airbitz said in an open letter to all New York residents that, luckily, it is not affected by BitLicense, nor it is going anywhere. New York users can access Airbitz just like anyone else in the world with Internet access can.
Why? “Because we are decentralized,” said the San Diego-based Airbitz in its letter, published Tuesday. “We don’t hold your Bitcoin. You do. It’s in your control at all times. It’s expensive to hold someone else’s money and we will continue to see states pass bills like this for any companies that do.”
Written by CEO Paul Puey, the letter stated, “With all the companies announcing these restrictions today, it should remind the community of the importance to be, and to support, decentralization. Bitcoin was intended to give people true control and access to their money and every time we use a centralized service, we aren’t truly using Bitcoin.”
Airbitz told New York not to worry. “You will always be able to find decentralized companies to work with. If the company has to comply with regulations, there is a good chance they maintain control of your money, and in the end that’s just not what Bitcoin was meant to be.”
New York flag – Public domain image
Jaron Lukasiewicz’s photo – Courtesy of Coinsetter
Airbitz logo and Paul Puey’s photo – Courtesy of Airbitz