Bitcoin is causing quite a few headaches for legislators and regulators all over the world. Even though some countries and US states have come up or are close to coming up – with a regulatory framework for Bitcoin, not all of them are positive, especially New York’s BitLicense regulation, which is causing an exodus of Bitcoin companies in the state. The latest company to leave is BitFinex, the largest US Bitcoin exchange platform.
Bitcoin Services Shutting Down in New York State
Say what you will about the BitLicense regulation, but it is not beneficial to Bitcoin growth at all. Not only are companies required to apply for a BitLicense in exchange for a non-refundable fee, but the legal fees are mounting as well. On top of that, applying for a BitLicense does not guarantee it will ever be issued to the company.
To make matters compoundingly worse, every Bitcoin company applying for a BitLicense will be required to log personal information regarding all of their customers. This data includes names, addresses, phone numbers, email addresses, and verification documents. All of this data has to be handed over when applying for a BitLicense, plus further storage of this data will be enforced as long as the company remains active in the state of New York.
It goes without saying that most companies are not too happy about these regulatory measures. Storing sensitive consumer data leads to centralization, which is exactly what Bitcoin and blockchain technology are opposing. Plus, being forced to pay hefty fees because regulators fail to implement a new type of framework for this new form of technology is not helping matters either.
The latest company to halt all of their services in the New York state is BitFinex, the largest US Bitcoin exchange platform to date. BitFinex publicly stated they will not be applying for a BitLicense at this time, and account privileges for New York residents will be modified accordingly. All of these changes have gone into effect as of August 10th, 2015.
New York residents can withdraw BitFinex account funds in Bitcoin until August 15th 2015. Failure to do so will result in account balances being exchanged to their corresponding USD value, and remain accessible at any given time. Granted, there is not much time for customers to act on this announcement, but the New York BitLicense regulation has forced the hand of BitFinex to act this way.
A New Technology Requires A New Regulatory Framework
It has become crystal clear that applying existing legislation and regulation to a new breed of technology such as Bitcoin is not sufficient. Doing so leads to harsh regulatory measures and companies being forced to leave the New York area. Not only will this cause distress among the New York Bitcoin community, but it also sends a clear signal to regulators that things need to change sooner rather than later.
The conversation between Bitcoin industry experts and regulators will need to be held, even though this is exactly what happened during the drafting period of BitLicense. Despite best efforts by Bitcoin experts, the regulators remain stuck in their old ways of thinking, and can’t grasp the influence their decision has over the financial landscape we are all suffering from.
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Images courtesy of BitLicense, BitFinex and Shutterstock