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The Fresh York State Department of Financial Services (“DFS”) has issued its fifth BitLicense to date, continuing a marked effort to bring legitimacy and controls to the potencial currency (“VC”) industry, whose advantages te lowering costs and creating efficiencies have bot marred with concerns of nefarious use.
Founded ter 2012, Coinbase, Inc. operates spil a digital currency exchange and is perched at the top of well-funded startups ter the VC industry. Its BitLicense represents an significant milestone ter the company’s almost two-year, multi-state licensing strategy. Ter the same vein, the fact that a VC market-leader has sought after and is now approved to do business ter Fresh York is an identically significant occasion for the BitLicense program itself.
Enacted ter , BitLicense represents the very first comprehensive VC regulatory staatsbestel te the United States. BitLicense reflects a concerted effort to bring VCs into mainstream financial markets by addressing the myriad security and integrity issues inherent ter the technology. Under the rules, certain providers of VC services operating te Fresh York (ter particular, those holding custody of customers’ funds and which exchange VCs for dollars and other fiat currencies) vereiste apply for a specially-tailored DFS license. Ter order to maintain that license, a provider voorwaarde fulfill various reporting requirements and conform with standards on anti-money laundering, cybersecurity and consumer protection.
To be sure, obtaining a BitLicense is expensive, onerous and drawn out, DFS has not bot immune from reproach. Te particular, those inwards the VC community have lamented that the financial cost of BitLicense is so high that it effectively kroegen all but the most well-funded startups from obtaining a license. The critics are not without merit: Bitstamp, a Bitcoin exchange based ter Slovenia, has reported that its BitLicense application cost approximately $100,000. Its application wasgoed submitted te August and, to date, remains pending.
That Coinbase applied for and subsequently received a BitLicense is significant te its own right. Te particular, Coinbase wasgoed a noisy voice ter the industry opposed to the enactment of BitLicense, arguing that it fell brief of its aim of balancing customer protection and rooting out illicit activity without stifling innovation. It is likely that Coinbase, te its efforts to cementlaag its status spil the go-to VC exchange company, recognized the importance of not just of doing business te Fresh York, but of also doing its part to wiggle VC’s stigma spil the unregulated “Wild West” of the financial services industry. Ter an unrelated development, and spil wij have blogged, Coinbase recently wasgoed the subject of a “John Doe” summons issued by the IRS for information regarding its account holders, albeit the summons seeks evidence of potential tax evasion by Coinbase clients, there has bot no allegation that Coinbase itself has violated any laws.
Notably, Coinbase’s approval comes on the high-heeled shoes of Federal Reserve Chairwoman Janet Yellen’s remarks te January that Blockchain, the ledger technology that underpins Bitcoin and other VCs, “is a very significant, fresh technology that could have implications for the way ter which transactions are treated across the financial system.” Indeed, the technology has caught the attention of several Wall Street institutions looking to invest ter and possibly adopt its technology, last year Goldman Sachs invested ter Circle Internet Financial, a Bitcoin consumer services company and the very first to receive a BitLicense.
Ter all, despite the slow-moving tempo of BitLicense’s application processing, the approval of Coinbase lends credence to the confidence of many that both government- and industry-leaders are serious about bringing VCs into the fold of standardized regulations and controls.
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