Coinbase’s Bitcoin Exchange Is Operating Without License in NYC and California

Coinbase is not licensed for serving its customers in California and New York.

Photo: Egor Pavlovich/Coinspeaker

Photo: Egor Pavlovich/Coinspeaker

This week, Coinbase announced the launch of the first regulated bitcoin exchange in the US. Following the announcement, the New York State Department of Financial Services (NYDFS) has claimed that Coinbase has not received a license for operating in New York.

The department is developing a final version of its BitLicense regulation and is working with Coinbase on its legal status in the state.

“We are working with several companies, including Coinbase, on licensing and will continue to move forward expeditiously,” said Matthew Anderson, a spokesman for Benjamin M. Lawsky, the superintendent of the NYDFS. “That said, we have not yet issued any licenses to virtual currency firms.”

In order to begin operations, every bitcoin company is required to have a money transmission license and will need a BitLicense, which is expected to be revealed in the near future.

Coinbase co-founder, Fred Ehrsam, noted the company will continue working with Benjamin M. Lawsky “on all Bitcoin matters involving consumers, merchants and the recently launched Coinbase Exchange.”

“We also look forward to continuing to work together on the completion of New York’s BitLicense,” Eshram added.

Coinbase is the leading bitcoin company and has already received hundreds of millions of investments. The company has recently announced that it had raised $75 million from a number of investors, such as the New York Stock Exchange and the Spanish bank BBVA.

The company is unlikely to face any penalties for serving consumers in New York. Still, any tension between bitcoin companies and regulators could negatively affect the reputation of cryptocurrency with the authorities.

Meantime, the Californian Department of Business Oversight (DBO), a company providing consumer protection and regulating different financial institutions, issued a consumer alert, stating Coinbase is not licensed to provide its services.

“Numerous press accounts about Coinbase’s Jan. 26 launch of Coinbase Exchange erroneously reported the Exchange has received regulatory approval from the State of California.

The California Department of Business Oversight has not decided whether to regulate virtual currency transactions, or the businesses that arrange such transactions, under the state’s Money Transmission Act.

California consumers should be aware Coinbase Exchange is not regulated or licensed by the State,” the document stated.

Tom Dresslar, a spokesman for the DBO, explained: “It’s not that if they operate in California, they’re breaking the law, but it’s important that consumers be aware that the Coinbase exchange is not regulated or licensed in California.”

Many bitcoin companies are waiting for BitLicense issuance to open exchange in the US, including Cameron Winklevoss and Tyler Winklevoss. The brothers have recently said they were planning to open a new-generation bitcoin exchange, called Gemini.

Coinbase received licenses in 14 states, while California and New York  are in a “grey zone” due to their bitcoin regulations.

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