Bitcoin wallet and exchange Coinbase yesterday announced that they have obtained the Bitlicense from the New York Department of Financial Services (NYDFS). It is the formal license to carry out digital currency-related businesses in the state of New York.
Coinbase believes that the long-term success of virtual currency and blockchain technologies will require productive partnerships between industry and government. Support from government is seen as essential in longevity of any cryptocurrency even by the other members of the crypto community.
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Further, Coinbase sees the Bitlicense as an important validation of its highest priority, which is, to operate the most secure and compliant digital currency exchange in the world. Coinbase plans to continue to make heavy investments in the security and integrity of its operations as it expands business in New York and around the world.
The BitLicense strengthens Coinbase’s operating status even if it was allowed to serve New York customers under a safe-harbor provision while the application process was being conducted.
The BitLicense regulatory guidelines were introduced in June 2015 by the state of New York in its pursuit to scrutinize Bitcoin companies even more than most other financial institutions in the state.
What’s interesting is the timing of the BitLicense which is being viewed as the “validation” of Coinbase’s aim to be compliant with regulatory considerations. The BitLicense comes at a time when the company is already embroiled in an expensive legal battle with the IRS.
The license was issued after a thorough review of Coinbase’s anti-money laundering, consumer protection, cyber security, and financial information policies as required by the BitLicense application.
But BitLicense itself has the Bitcoin community confused if not divided, due to its controversial regulatory structure as it has extensive data gathering standards, associated expenses, and stringent reporting requirements, even after it’s granted.
Moreover, the costly and cumbersome requirements for the license have many companies getting out of the state. And there are only two issued BitLicense before Coinbase, to Boston-based bitcoin startup, Circle Internet Financial Inc., and distributed ledger startup, Ripple.