By
Mayowa Adebajo
April 15th, 2024
Cryptocurrency wallet and vault Xapo is the latest recipient of New York’s ‘BitLicense’, arguably the strictest state law governing the crypto sector, from the state’s financial regulator.
As a part of continued commitment of the New York Department of Financial Services (DFS) to creating a thriving, global fintech marketplace in compliance with a strong and thoughtful regulatory oversight supposed to benefit both holders and producers of virtual assets, DFS broadens the list of approved cryptocurrency firms with the leading Bitcoin wallet and cold storage service Xapo.
According to the recent announcement of Financial Services Superintendent Maria T. Vullo, the Department of Financial Services has granted Xapo, formerly known as itBit Trust Company, a virtual currency license to offer exchange and custody services for Ether, Litecoin, Stellar Lumens and Bitcoin Cash, emerging cryptocurrencies, on its virtual currency exchange.
Xapo, a blockchain-based start-up was co-founded by Paypal board member Wences Caceres. Its board of advisers is led by former U.S. Treasury Secretary Lawrence Summers and former Citibank chairman and chief executive John Reed.
In order to receive a BitLicense, Xapo has undergone a comprehensive review conducted by DFS’s office, which included in-deep analysis of the company’s anti-money laundering, anti-fraud, capitalization, consumer protection, and cybersecurity policies.
Additionally the statement noted that the new license is subject to ongoing supervision from the DFS. Notably, this is the sixth-ever BitLicense the state has granted, with the last one being obtained by brokerage firm Genesis Global Trading in May 2018.
With the obtained license Xapo will now be authorized to offer its digital wallet and its offline vault service to users in New York. Initially headquartered in San Francisco, California, Xapo has since moved its base of operations to the Swiss town of Zug, commonly known as the ‘Crypto Valley’, citing relatively favorable regulatory conditions in early 2017.
The president of Switzerland-based Xapo, Ted Rogers commented on the successful BitLicense application, saying:
“We are very pleased with the approval of Xapo’s BitLicense application. It is the end result of much hard work, not just by Xapo personnel but by the DFS and its staff.”
The New York DFS had previously issued a virtual currency charter to itBit in May 2015. Today, DFS authorized itBit’s parent company, Paxos, is the second largest in the United States in terms of the U.S. dollar/bitcoin currency pair, with daily volume of roughly $100 million.
The chief executive officer of itBit, Chad Cascarilla, in the press release prepared by the New York DFS said:
“Regulatory oversight and security have always been at the forefront of building our platform. We are committed to the growth and evolution of this ecosystem and DFS approval allows us to offer more trading and custody services across a wider range of crypto assets.”
Despite its current importance for cryptocurrency community, various industry analysts have in the past criticized the BitLicense, arguing its nature is counterproductive. ShapeShift CEO Erik Voorhees recently called it an “absolute failure” that “should be removed.”
Notably, the license was brought forth by a regulator who, after introducing it, created a firm that helps crypto companies navigate the state’s regulations. After the BitLicense came into effect in 2015, various businesses, including popular crypto exchange Kraken, decided to exit New York.
In total along with the Xapo approval, DFS has now approved eight firms for virtual currency charters or licenses, while denying applications that did not meet DFS standards. DFS has granted licenses to Genesis, bitFlyer USA, Coinbase, XRP II, and Circle Internet Financial, while charters have been granted to Gemini Trust Company and Paxos.