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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: November 16, 2017
The Firm
201-896-4100 info@sh-law.comNew York is one of the first states in the country to enact a regulatory framework for virtual currencies such as Bitcoin. Under regulations enacted by New York State Department of Financial Services (NYDFS) in 2015, businesses must obtain a virtual currency license, commonly referred to as a “BitLicense,” prior to engaging in any virtual currency business activity.
New York’s virtual currency regulation broadly defines “virtual currency” to include digital units of exchange that (i) have a centralized repository or administrator; (ii) are decentralized and have no centralized repository or administrator; or (iii) may be created or obtained by computing or manufacturing effort. Entities engaging in any of the following activities are required to obtain a BitLicense:
An entity chartered under the New York Banking Law must receive the prior approval of the NYDFS to engage in virtual currency business activity. In addition, out-of-state businesses are required to obtain a virtual currency license to engage in virtual currency business activity involving New York State or persons that reside, are located, have a place of business, or are conducting business in New York.
The requirements do not apply to consumers who wish to purchase goods or services with virtual currency or merchants who want to accept virtual currency as payment for goods or services. In addition, where a transaction is undertaken for non-financial purposes and does not involve more than a nominal amount of virtual currency, a BitLicense is not required. The development and dissemination of software in and of itself does not constitute virtual currency business activity requiring licensing.
The application for a BitLicense is comprehensive and requires businesses to provide detailed information about their operations as well as their management. Applicants must provide the following information, among other requirements:
The Application Forms for License to Engage in Virtual Currency Business Activity are available online, but must be submitted in hard copy to the NYDFS. The filing fee is $5,000. To ensure compliance with New York’s virtual currency regulations and licensing requirements, it is advisable to work with an experienced attorney.
Do you have any feedback, thoughts, reactions or comments concerning this topic? Feel free to leave a comment below for Fernando M. Pinguelo. If you have any questions about this post, please contact me or the Scarinci Hollenbeck attorney with whom you work.
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