New York has started implementing its BitLicense recently, much to the dismay of bitcoin startups that are unable to come up with enough funds to obtain licenses for its products. In fact, Poloniex, a NY-based bitcoin exchange, recently decided to move its operations elsewhere due to the limitations imposed by the regulatory framework.
BitLicense was drafted and put in force by the New York Department of Financial Services under the leadership of former head Benjamin Lawsky. After its implementation, Lawsky then resigned from his post to form a consultancy group.
BitLicense and Bitcoin Startups
Prior to Poloniex’s departure, three other bitcoin startups have decided to relocate to other places that are more open to cryptocurrency developments. For many bitcoin enthusiasts, BitLicense is stifling development and innovation in the cryptocurrency industry due to its high fees required for bitcoin startups to operate in the state.
For one, the BitLicense non-refundable application fee is at $5,000 for small exchanges or bitcoin startups. Aside from that, the current version of the regulation requires companies to meet a long list of qualifications before they can be licensed to operate legally.
“In the case of BitLicense, once you pay the application fee, you’re then facing a long list of requirements that would disqualify most small businesses,” said Poloniex founder Tristan 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.”
“There are always pros and cons to regulations like BitLicense, but from a small business perspective, BitLicense is both limiting and frustrating,” D’Agosta added. “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.”