New York’s BitLicense regulation has already drawn the ire of crypto advocacy groups and startups since it was introduced in 2014. Crypto businesses bolted from the state, blaming the law’s onerous requirements for their departure. Now a small business entrepreneur is calling for an abolition for an abolition of the license in a lawsuit filed with the New York Department of Financial Services (NYDFS).
Filed by Theo Chino, the lawsuit charges DFS with a regulatory scheme to “quash” the growth of cryptocurrency-based businesses in New York. According to Chino, the department is doing this by creating “a complex and burdensome” set of requirements for businesses. Chino’s small business wanted “New York City bodegas, small grocery stores, and convenience stores to be able to accept Bitcoin in everyday life,” the filing states. After realizing the license’s requirements, Chino filed a complaint against DFS with violating the “separation of powers” doctrine and devising an “arbitrary and capricious” system to award licenses. The current suit is an evolution of the complaint.
An Unpopular Regulation
New York state had awarded 19 BitLicenses, as of April this year. The slow pace of issuance for licenses may be partly due to the requirements imposed by the regulation. For example, crypto-businesses are required to get approval for changes to their business operations from regulators. They should also maintain reserve capital requirements that are determined on an individual basis. Surety bonds and trust accounts are also necessary and the amount is, again, determined by the Superintendent at NYDFS.
In 2015, Coincenter, a Washington D.C. – based crypto advocacy group, wrote that the final BitLicense creates an “unprecedented and discriminatory state-level AML reporting obligation.” “It has cybersecurity and state-level AML requirements that will not and have never applied to the legacy payments industry,” wrote Peter Van Valkenburgh, director of research at the non-profit.