As we’ve mentioned in our other Korean Law Blog, virtual currency or more popularly known as cryptocurrency is a digital representation of value that can be digitally traded or transferred. When holders are using these virtual currencies the transactions are completed via Blockchains (decentralized databases). For article on virtual currency law in Korea, please read: Korea’s Virtual Assets/ Cryptocurrency Law. This law firm works on ICO and Blockchain matters for clients doing business in the United States, Korea, China and Southeast Asia.
New York is, arguably, the center of the global financial market. New York proactively considered opportunities in cryptocurrency and, thus, enacted regulations governing cryptocurrency transactions. Hence, when Bitcoin, Ethereum, and other cryptocurrencies became popular among consumers and investors alike, the New York State, through its Department of Financial Service, immediately issued Virtual Currency Regulation 23 NYCRR Part 200 in 2015 under the New York Financial Services Law.
New York Get BitLicense?
Under New York Virtual Currency Regulation, a company or individual in the business of virtual currency is required to secure a BitLicense. The New York Department of Financial Services (“NYDFS”) is the main regulatory body that issues BitLicenses.
A company or individual is in the virtual currency business if the person or company conducts the following business in New York or with New York residents (23 NYCRR 200.2q):
- receiving virtual currency for transmitting of virtual currency;
- maintaining custody of virtual currency for a third person;
- buying or selling virtual currency as a business;
- performing exchange services as a business; or
- controlling, administering, or issuing a virtual currency.
If you are a company or individual that is not engaged in the above-mentioned activities you are not required to get a BitLicense – in most cases. Please note, however, that the law is changing frequently.
Conditional BitLicenses in New York
The strict implementation of virtual currency regulations drew mixed sentiment from companies and individuals engage in the business of cryptocurrencies. The application process is not simple and approval is not swift. For instance, sometimes the approval and granting of a BitLicense may take an applicant over a year to obtain.
Therefore, many cryptocurrency companies applauded the action of the New York Department of Financial Services when it proposed the Framework for Conditional BitLicense. This Conditional BitLicense is part of the 2015 virtual currency regulation, but due to a lack of clear guidelines from NYDFS, the New York never implemented Conditional Bitlicense rules.
The proposed Framework for Conditional BitLicense provides that applicants for a Conditional BitLicense only is required to submit to NYDFS a copy of the Service Level Agreement with an existing holder of BitLicense and to agree to NYDFS supervision before the Conditional BitLicense is granted. Some believe that once this Framework for Conditional BitLicense is fully implemented, more companies and individuals shall open or relocate their virtual currency, blockchain businesses to New York.
Regularly check back to our New York Law Blog and Korean Law Blog for updates on this issue. We shall update the reader when more information becomes available.
And if you want to know more about Virtual Currency in New York, please: Schedule a Call with a New York Lawyer.
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