NY DFS to Pair Companies With ‘Guardians’ for a Conditional BitLicense
June 25, 2020 6:38 pm
The New York State Department of Financial Services or NY DFS, is proposing a “Conditional BitLicense” framework to amend its controversial BitLicense regulation introduced in 2015, that would help smaller companies be regulated.
In a petition for comment released on June 25, the regulator details its amended approach to issue conditional BitLicenses. This license type had already existed since the inception of the program, but there were no clear rules for obtaining it as it was entirely at the inclination of the regulator.
The new framework would allow proposed licensees to collaborate with an existing BitLicense holder to receive dedicated guidance relating to the structure, capital, systems and personnel requirements.
Hurdles in the Path of BitLicense
The proposal would help overcome “the actual or perceived hurdles” in achieving the BitLicense by using the expertise of an existing license holder.
The statement details a general procedure for applying to the conditional license. Applicants must indicate their interest in the program by reaching the DFS with an already compiled draft of a service level agreement with a license holder. The applicant will then be required to provide documents and information as indicated by the DFS, which will be tailored to the specific type of business and the risks presented by its activity. If DFS approves the application, the applicant will enter into a supervisory agreement with DFS and obtain a conditional BitLicense. The regulator expects that businesses will ultimately pursue a full license.
The program is tailored primarily for smaller startups and growing companies as well as established businesses, want to enter the crypto ecosystem. The regulator is nevertheless receiving feedback from stakeholders on the proposed program under an August 10 deadline.
Criticism of BitLicense
New York’s licensing program has been extensively criticized in the past due to its strictness and complexity. Approaching 2020, the regulator attempted to improve on some of the criticism by amending it for the first time in almost five years, followed the establishment of a crypto task force in July, which could have pushed the betterment.
While some of the major exchanges operating on U.S soil, like Kraken and Binance.Us, did not obtain the BitLicense and are thus unqualified to serve New York-based customers, other companies are still prepared to go through the hurdle. The hurdle could become vital as New York Governor Andrew Cuomo had proposed in January that companies would cover the costs of DFS supervision.