Bitcoin companies had until last Friday to make an unenviable choice: Either spend about $55,000 applying for a BitLicense—and commit to shelling out for ongoing compliance fees—or get the hell out of New York State.
Many are getting the hell out of New York State.
One of the last to announce its departure was Genesis Mining, which explained its move in a blog post:
While advocates for the BitLicense say they want to protect consumers, what the act really does is stifle innovation. It's complex, expensive, and comes with a set of guidelines that make it nearly impossible for any startup to comply with.
While 22 companies submitted applications, 10 announced they were shutting off service for customers in New York State rather than apply for a BitLicense. The list includes Kraken, GoCoin, ShapeShift, LocalBitcoins, and BitFinex.
In a blog post, LocalBitcoins explained it simply didn't have the money to participate:
As the Bitlicense is time consuming, expensive and difficult to obtain for anything but large companies we've taken the decision to protect our US based traders and not allow New York based users to use our service.
The Bitcoin exchange Coinsetter, which applied for the permit, shared some details about the process with New York Business Journal:
The 30-page application included a $5,000 fee to Financial Services, and an additional 20 pages of rules to follow, according to [founder and CEO Jaron] Lukasiewicz. Over the past two years, he estimates his company spent $50,000 in legal fees and other labor costs to prepare for and complete the paperwork.
The BitLicense was established by New York State's top financial regulator, Benjamin Lawsky, who announced he was stepping down immediately after the new permitting process took effect to become a private consultant. (Lawsky maintains he won't do any business with cryptocurrency firms.)
For more on why the BitLicense is a destructive new regulatory regime that duplicates rules and procedures already in place—and will give Wall Street a leg up in an industry that otherwise has the potential to drain power and influence away from Wall Street—watch out my recent Reason TV story, "Bitcoin's Regulatory Nightmare Is About To Get More Frightening."