Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Obtaining a Virtual Currency License in New York

Author: Scarinci Hollenbeck, LLC

Date: November 16, 2017

Key Contacts

Back

NYDFS Regulations Require New York Businesses To Obtain a Virtual Currency License Before Engaging In Virtual Currency Business Activity

New 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.

Obtaining a New York Virtual Currency License
Photo courtesy of Ben O’bro (Unsplash.com)

Who Must Obtain a BitLicense?

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:

  • Virtual currency transmission;
  • Storing, holding, or maintaining custody or control of virtual currency on behalf of others;
  • Buying and selling virtual currency as a customer business;
  • Performing exchange services as a customer business; and
  • Controlling, administering, or issuing a virtual currency.

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.

BitLicense Regulatory Requirements

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 exact name of the applicant, including any doing business as name, the form of organization, the date of organization, and the jurisdiction where organized or incorporated;
  • A list of all of the applicant’s affiliates and an organization chart illustrating the relationship among the applicant and such affiliates;
  • A list of, and detailed biographical information for, each individual applicant and each director, Principal Officer, Principal Stockholder, and Principal Beneficiary of the applicant, as applicable, including such individual’s name, physical and mailing addresses, and information and documentation regarding such individual’s personal history, experience, and qualification, which must be accompanied by a form of authority, executed by such individual, to release information to the NYDFS;
  • A background report prepared by an independent investigatory agency for each individual applicant, and each Principal Officer, Principal Stockholder, and Principal Beneficiary of the applicant, as applicable;
  • A set of fingerprints and portrait-style photographs for each individual applicant; for each Principal Officer, Principal Stockholder, and Principal Beneficiary of the applicant, as applicable; and for all individuals to be employed by the applicant who has access to any customer funds, whether denominated in Fiat Currency or Virtual Currency;
  • An organization chart of the applicant and its management structure, including its Principal Officers or senior management, indicating lines of authority and the allocation of duties among its Principal Officers or senior management;
  • A current financial statement for the applicant and each Principal Officer, Principal Stockholder, and Principal Beneficiary of the applicant, as applicable, and a projected balance sheet and income statement for the following year of the applicant’s operation;
  • A description of the proposed, current, and historical business of the applicant, including detail on the products and services provided and to be provided, all associated website addresses, the jurisdictions in which the applicant is engaged in business, the principal place of business, the primary market of operation, the projected customer base, any specific marketing targets, and the physical address of any operation in New York;
  • Details of all banking arrangements;
  • All written policies and procedures required under the regulation, such as cybersecurity;
  • An affidavit describing any pending or threatened administrative, civil, or criminal action, litigation, or proceeding before any governmental agency, court, or arbitration tribunal against the applicant or any of its directors, Principal Officers, Principal Stockholders, and Principal Beneficiaries, as applicable, including the names of the parties, the nature of the proceeding, and the current status of the proceeding;
  • Verification from the New York State Department of Taxation and Finance that the applicant is compliant with all New York State tax obligations in a form acceptable to the superintendent;
  • If applicable, a copy of any insurance policies maintained for the benefit of the applicant, its directors or officers, or its customers; and
  • An explanation of the methodology used to calculate the value of Virtual Currency in Fiat Currency.

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.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"
How Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"
What Are FIRPTA Withholding Requirements? post image

What Are FIRPTA Withholding Requirements?

If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]

Author: Jesse M. Dimitro

Link to post with title - "What Are FIRPTA Withholding Requirements?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: