Poloniex, an American cryptocurrency exchange, has left New York because of BitLicense’s restrictions and limitations, reported Bitcoin Magazine. The publication reported that for a relatively small enterprise such as Poloniex, the license’s requirements for digital currency startups to pay a $5,000 non-refundable application fee to operate and maintain their services in New York is a challenging demand to meet.
“There are always pros and cons to regulations like BitLicense, but from a small business perspective, BitLicense is both limiting and frustrating,” said Poloniex founder Tristan D’Agosta to Bitcoin Magazine. “For a small business like ours, a $5,000 non-refundable application fee is a nonstarter. Consider what would happen if every state in the union followed suit – it would cost $250,000 just to apply for licenses in all 50 states.”
Moreover, the current iteration of BitLicense requires digital currency startups and exchanges to satisfy a long list of qualifications before they can be licensed to operate legally. Bitcoin Magazine said that for most small startups and exchanges, it’s quite challenging to meet all the requirements and comply with the set of regulations outlined in BitLicense.
“In the case of BitLicense, once you pay the application fee, you’re then facing a long list of qualifications that would disqualify most small businesses,” said D’Agosta. “As a result, we find ourselves in No Man’s Land, where we very much want to service our New York customers, but we are not big enough to qualify for a BitLicense.”
In an interview with Bitcoin Magazine, Coin Center executive director Jerry Brito said Poloniex’s move to terminate operations in New York is one he expects to be repeated in the digital currency sector. “It’s no surprise that small companies are ceasing operations because they can’t afford to go through the licensing process. A clear, certain, and graduated on-ramp for startups could have prevented this, but the final BitLicense only has a discretionary transitional license which is probably too uncertain for startups and investors to plan around.”
Two other businesses have also just pulled out of New York because of BitLicense.
Bitcoin exchange Kraken announced Sunday it has discontinued services to New York residents. In a cheeky blog post with references to the 1981 dystopian film Escape from New York, Kraken wrote, “Regrettably, the abominable BitLicense has awakened. It is a creation so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth. It’s at least a 40-man, bro.”
“While we’re sure that the protection from New York law enforcement is valuable, it comes at a price that exceeds the market opportunity of servicing New York residents. Therefore, we have no option but to withdraw our services from the state. Clients living in New York [Kraken’s emphasis] who wish to continue enjoying our award-winning service are encouraged to escape [Kraken’s emphasis] across the border before the consumer protective walls are erected around the state line.”
Kraken added, “If the BitLicense becomes significantly nerfed as some point in the future, we may attempt a rescue. Until then, you’re on your own. Good luck.”
The post includes contact information for the New York Department of Financial Services’ superintendent as well the state’s governor, presumably in a call-for-action for people to express their displeasure with BitLicense.
Also joining the exodus is Bitfinex, which announced Friday that certain services are no longer available for New York residents.
The digital currency trading platform said it is not applying for a BitLicense at this time, and is modifying account privileges for New York residents as of today.
Clients who live in New York must withdraw all cryptocurrency balances currently held on Bitfinex by 4 p.m. EST on August 15. The company encourages these clients to specify “Locked Withdrawal Addresses” that it uses to automatically sweep any funds that may be sent to one of the affected clients’ deposit addresses in the future. Bitfinex said that failure to specify these Locked Withdrawal Addresses will result in the automatic liquidation of future deposits.
The company added that New York residents will no longer have access to the exchange, margin trading and swaps market features on Bitfinex.com.
It said that clients who do not remove their cryptocurrency holdings from their Bitfinex accounts by midnight on August 15 will have their balances exchanged to USD market rates. The resulting USD balance will be available in client accounts for customers to access at any time.
Bitfinex concluded its announcement by saying, “We continue to monitor the evolving regulatory landscape in New York and elsewhere in an effort to offer superior service, consumer protection and security, and to remain compliant with applicable laws.”
Meanwhile, Bitstamp, the Slovenia-based Bitcoin exchange that made headlines in January following a breach that saw the loss of $5 million in BTC, plans to apply for a BitLicense.
Bitstamp CEO Nejc Kodrič made the announcement on Twitter on Sunday and promptly received a lot of flak. Many of those who responded to the tweet urged Bitstamp not to apply for the license, stating the company should follow Bitfinex and Kraken’s examples. Some suggested Bitstamp is enabling bullies, while others said they would close their accounts with the exchange. George Harrap, founder of the Hong Kong-based Bitcoin firm Bitspark, tweeted the following back to Kodrič: “dumb idea. It doesn’t make your business anymore ‘legitimate’.”
Statue of Liberty – William Warby
Jerry Brito’s photo – via CoinCenter.org (CC BY-SA 3.0 US)
Kraken logo – Source