Contortions for Compliance: Life Under New York's BitLicense

Sarah H. Brennan, a corporate and securities attorney, leads the blockchain technology, cryptocurrency and digital assets practice team at Lippes Mathias Wexler Friedman LLP. In June 2015, in a race to be a first mover in the space, the New York Department of Financial Services enacted the BitLicense regulatory framework, a licensing regime that covers substantially all "Virtual currency business activity" to the extent it touches New York or its residents. Namely, any business engaging 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 must apply for the BitLicense, with no grace periods or de minimis exceptions. To the extent a business makes it through the licensing process and receives a BitLicense, as a whopping four businesses have to date, the BitLicense imposes significant operational burdens, requiring robust compliance policies and processes with respect to anti-fraud, anti-money-laundering, cybersecurity, privacy and information security, among other requirements. As the token is in the development stage, we are in the clear to develop the underlying software in New York State under the BitLicense regulations.
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