The New York State Department of Financial Services (NYDFS) has issued its second virtual currency license, known as BitLicense. This time NYDFS made a thorough review and approved of the application of Ripple Labs’ affiliate, XRP II, LLC. The regulators admit that they had rigorously studied Ripple’s anti-money laundering, capitalization, consumer protection, and cyber security standards to issue the license.
“DFS is pleased to continue to foster the growth of the New York virtual currency marketplace and industry through thoughtful and appropriate regulation,” said Acting Department of Financial Services Superintendent Maria T. Vullo. “DFS will continue to progress on licensing virtual currency firms while acting in the best interests of New York consumers.”
BitLicense is a set of regulations for businesses to operate with virtual currency in the state. It is equivalent to the rules applied to money transmission businesses, while at the same time contains additional cryptocurrency-specific provisions. BitLicense encountered much critic in the bitcoin community as rules seemed to be too burdensome and able to stifle innovation. At the same time bitcoin is often dismissed as a currency that is too volatile to invest in.
Thus, some kind of regulation was just necessary. Benjamin Lawsky, former superintendent of the NYDFS, explained how they tried to do the best: “Getting that balance right is hard, but it is key. We want to promote and support companies that use new, emerging technologies to build better financial companies. We just need to make sure that we put appropriate regulatory guardrails in place”.
The final version of the BitLicense was announced in June 2015. The DFS has received 26 BitLicense applications. It had already denied two applications for a BitLicense from Snapcard Inc. and OKLink PTE LTD. The companies were ordered to stop any New York operations.
In September 2015, Circle, a digital currency company founded in 2013 by Internet entrepreneurs Jeremy Allaire and Sean Neville and backed by leading venture capital investors, was lucky to get the first BitLicense. It is interesting that Circle had earlier come out into the open about its dissatisfaction with too strict rules of the BitLicense. Some kind of compromise must have been found later and Circle agreed to the irrefutable requirements for operating with bitcoin.
“Earning the BitLicense is an incredible validation of the institutional use of digital assets by DFS, one of the most influential state regulators,” said Ripple co-founder and CEO Chris Larsen. “With the BitLicense in hand, we look forward to working with our New York bank customers seeking to use XRP for liquidity and cost savings.”