A BitLicense is the common term used for a business license of virtual currency activities, issued by the New York State Department of Financial Services (NYSDFS) under regulations designed for companies. The regulations are limited to activities involving the state of New York or a New York resident. People residing in, located in, having a place of business in, or conducting business in the State of New York count as New York Residents under these regulations. The license was introduced and designed by Benjamin Lawsky, New York's first Superintendent of Financial Services, in July 2014. Chartered entities do not require an explicit BitLicense, but may instead proceed with virtual currency activities via limited purpose trust charters approved by the NYDFS.
The regulations define virtual currency business activity as any one of the following types of activities:
- receiving virtual currency for Transmission or Transmitting virtual Currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of virtual currency;
- storing, holding, or maintaining custody or control of virtual currency on behalf of others;
- buying and selling virtual currency as a customer business;
- performing Exchange Services as a customer business, or;
- controlling, administering, or issuing a virtual currency.
The two following activities are excluded from the definition of virtual currency business activity:
- development and dissemination of software in and of itself;
- merchants and consumers that utilize virtual currency solely for the purchase or sale of goods or services or for investment purposes.
On July 17, 2014, the department released details on a proposed "BitLicense", which places regulations on any company or person that uses cryptocurrencies residing in New York. The proposed regulations were officially published in the New York State Register on July 23, beginning a 45-day comment period. On February 25, 2015, a revised proposal notice was published, beginning another 30-day comment period.
It came into effect on August 8, 2015. At least ten bitcoin companies announced they were stopping all business in New York State because of the new regulations. The New York Business Journal called this the "Great Bitcoin Exodus".
Two virtual currency limited purpose trust company charters were approved by the NYDFS in 2015, the first in May 2015 to itBit, now Paxos Trust Company, and the second charter in October 2015 to Gemini.
In October 2015, an article 78 was filed in the Supreme Court of the State of New York challenging the authority of the New York State Department of Financial Services to define virtual currency. Justice St George heard the case on October 10, 2017 and dismissed the case on December 27, 2017. The case is currently on appeal.
BitPay was awarded the eighth BitLicense in July 2018.
In November 2018, Texas-based Coinsource, an operator of Bitcoin Teller Machines, was awarded the twelfth virtual currency license or charter.
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- New York State Department of Financial Services (July 17, 2014). "NYDFS Releases Proposed BitLicense Regulatory Framework for Virtual Currency Firms" (Press release). Archived from the original on 2014-09-23. Retrieved July 19, 2014.
- New York State Register, Vol. XXXVI, Issue 23 (July 23, 2014), pp. 14-16. Rulemaking I.D. No. DFS-29-14-00015-P.
- New York State Register, Vol. XXXVII, Issue 8 (February 25, 2015), pp. 17-18. Rulemaking I.D. No. DFS-29-14-00015-RP.
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- "New York State Supreme Court Hearing Transcript" (PDF). Archived from the original (PDF) on 2017-10-31.
- "DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITFLYER USA, INC". www.dfs.ny.gov. Retrieved 2018-11-06.
- www.dfs.ny.gov CONTINUES ACTIONS TO SUPPORT RESPONSIBLE INNOVATION IN NEW YORK’S FINTECH INDUSTRY https://www.dfs.ny.gov/about/press/pr1805171.htm=DFS CONTINUES ACTIONS TO SUPPORT RESPONSIBLE INNOVATION IN NEW YORK’S FINTECH INDUSTRY Check
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- "June 14, 2018: DFS Continues to Advance Responsible Growth in New York'S Fintech Industry with New Virtual Currency Approvals". www.dfs.ny.gov. Retrieved 2018-06-18.
- "June 18, 2018: DFS Grants Virtual Currency License to Square, Inc". www.dfs.ny.gov. Retrieved 2018-06-18.
- "July 16, 2018: DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITPAY, INC". www.dfs.ny.gov. Retrieved 2018-11-06.
- "November 1, 2018: DFS GRANTS VIRTUAL CURRENCY LICENSE TO COINSOURCE, INC". www.dfs.ny.gov. Retrieved 2018-11-06.
- "January 24, 2019: DFS CONTINUES TO ADVANCE RESPONSIBLE INNOVATION IN NEW YORK'S FINTECH INDUSTRY". www.dfs.ny.gov. Retrieved 2019-01-24.
- "April 9, 2019: DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITSTAMP USA, INC". www.dfs.ny.gov. Retrieved 2019-04-09.
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