Mr. Benjamin M. Lawsky
Superintendent of Financial Services
New York Department of Financial Services
One State Street
New York, NY 10004-1511
Dana V. Syracuse
Office of General Counsel
New York Department of Financial Services
One State Street
New York, NY 10004-1511
March 24, 2015
Dear Mr. Lawsky and Mr. Syracuse,
The undersigned companies, organizations, and individuals are members of the technology community and have an interest in researching and promoting decentralized technology, and investing in and providing services and software products that use or leverage digital currency to citizens of the state of New York.
We as a community understand the public policy goals behind the New York Department of Financial Services rulemaking under Title 23, Part 200: Virtual Currencies or “BitLicense.” At the same time, we seek to promote policies that will enable the tremendous amount of potential that digital currencies and associated technologies have to offer. For example, if allowed to flourish, this technology can provide compelling solutions for the 93 million Americans that are un- or underbanked, enable workers abroad to send remittances home without hefty fees,[1] eliminate the substantial public policy challenge of continual data breaches where citizens’ personally identifiable information is compromised, and bring jobs to the state of New York.[2]
Developing sound policy that enables innovation can make the difference between a future in which technology has helped solve these problems, and one in which entrepreneurs are stifled because they cannot afford the cost of compliance. We seek to strike a balance between these two by proposing a safe harbor for the BitLicense.
This safe harbor would enable startups, open source projects, and innovators to develop new technologies and services without having to go through the costly and complicated licensing process , while compelling good behavior on behalf of these actors that meet public policy goals of consumer protection, security, and safety. Under a safe harbor, entities should be required to follow best practices in security,[3] including the latest advancements in blockchain-based technology to increase transparency and safety, disclose policies around consumer protection, and comply with relevant AML laws including, if applicable, registration with the Financial Crimes Enforcement Network (FinCEN).
The safe harbor should cover at a minimum four main areas:
(1) Small startups: Within the first 24 months of launching, startups should be given leeway to grow without the burden of tens or hundreds of thousands of dollars in compliance fees. The safe harbor should exempt small startups from licensing requirements, with two years as a starting point to get off the ground, without having to first seek permission from the Department of Financial Services. It should also allow for the possibility of renewal after this period.
(2) Microtransactions: Companies and open source projects that enable people to send small payments—anywhere from fractions of a cent to single digit dollars worth—should be allowed to innovate in the same way that other industries such as prepaid cards can. Under the safe harbor, intermediaries should be allowed to process a fixed amount per user per week in transactions without the requirement of a license.
(3) Security intermediaries: Those that hold keys in order to secure digital currency but do not have the ability to control (and therefore lose) the funds should not be subject to licensing the way that banks or custodial firms are. Examples of this technology are multisignature or threshold encryption, but we’re only at the beginning in terms of what is possible. These innovators enable greater security and less risk for consumers, and the development of this technology should be encouraged.
(4) Protocols and new currencies: BitLicense currently requires anyone that “control[s], issue[s], or administer[s] a virtual currency” obtain a license. Requiring innovators to do so would stifle many of the new developments in the space. From new assets on top of sidechains to tokens for decentralized file storage systems, creators of new decentralized protocols and technologies should be able to experiment without asking for explicit permission to do so. The safe harbor should ensure that this crucial aspect of innovation can continue.
The NYDFS has demonstrated a willingness to partner with the bitcoin and virtual currency community by making a good-faith effort of publicly engaging the community to collaboratively draft these rules and regulations that will support commerce and innovation while still providing strong consumer protections for those residing in New York and beyond. We believe that a safe harbor is a natural extension of New York’s stated goals, and will enable it to strike that balance.
Thank you for your consideration of our request and we would be happy to speak further on these issues at your convenience.
Sincerely,
Union Square Ventures
Coinbase
Blockstream
Ripple Labs
Jeremy Allaire, CEO, Circle
Sean Neville, CTO, Circle
John Beccia, General Counsel, Circle
George Frost, General Counsel, Bitstamp Ltd.
Azba Habib, Regulatory Counsel, BitPay
Will O'Brien, CEO, BitGo
Ben Davenport, CPO, BitGo
Alexis Ohanian, Cofounder & Executive Chair, reddit
Patrick Murck, Executive Director, Bitcoin Foundation
Marco Santori, Chairman, Regulatory Affairs Committee, Bitcoin Foundation
Adam Ludwin, CEO, Chain, Inc.
John Q Smith, COO, ChangeCoin (creator of ChangeTip)
Mike Masnick, Founder, TechDirt and COPIA Institute
Sascha Meinrath, Director, X-Lab
Paul Veradittakit, VP, Pantera Capital
Johnny Reinsch, SVP, Legal & Strategy, Xapo
Tom Mornini, CEO, Subledger
Byron Gibson, COO, Mirror
Alex Morcos, Co-Founder, Chaincode Labs
Alan Reiner, CEO, Armory Technologies, Inc.
Peter Todd, Bitcoin Core developer
Matt Corallo, Bitcoin Core developer
Erik Voorhees
Ryan Shea, CEO, Onename
Nick Pinkston, CEO, Plethora Corp.
Elizabeth Stark, Founder, StartBitcoin.org
Aaron Wright, Professor, Cardozo Law School
Houman Shadab, Professor, New York Law School
Peter Van Valkenburgh, Director of Research, Coin Center
Marvin Ammori, Founder, Ammori Group
Pamela Morgan, Empowered Law PLLC
Samuel Klein, Harvard Berkman Center
Digtal Asset Transfer Authority (DATA)
Fight for the Future
Miron Cuperman, CTO, CryptoCorp Inc.
Vadim Telyatnikov, CEO, AlphaPoint
Joel Dietz, CEO, Swarm
Jesse Walden, Cofounder, Mine
Melanie Shapiro, CEO, Case Wallet Inc
Tom Ding, CEO, Koinify
Taariq Lewis, CEO, DigitalTangible Inc.
Haseeb Awan, Co-Founder, BitAccess
Ryan Singer, CEO, Domus Tower, Inc.
Bill Gleim, Co-Founder, Coinalytics
Mickey Costa, Founder, Atlas Card
George Burke, Co-Founder, FreshPay
Jeremy Gardner, College Cryptocurrency Network
Jeremy Rubin, MIT Bitcoin Club
Dan Elitzer, MIT Bitcoin Club
Nchinda Nchinda, MIT Bitcoin Club
Jinglan Wang, Wellesley Bitcoin Club
Ryan Breslow, Stanford Bitcoin Group
Austin Walne, StartBitcoin.org
Derek Khanna
Joseph Krug, Forecast Foundation
Gabrielle Patrick
Perry Woodin
Matthew Odell, Coinprices.io
Jeroen Merks
L. Asher Corson, Co-Founder, Oasiscoin, LLC
Lucas Ryan, CTO, TrustedCoin, LLC
Brian Goss
Karthik D.V., Cointures
Alex Akselrod
Arianna Simpson, BitGo
Benedict Chan, BitGo
John Light
Brian Hoffmann, OpenBazaar
Toni Lane Casserly, CEO, CoinTelegraph
Rick Barber
Brandon Goldman, CEO, FreshPay
Marshall Swatt, CoinSetter, Inc.
Andrew Beal, Crowley Corporate Attorneys
Paige Peterson, Maidsafe
Austin Alexander, Kraken
Keith D. Wilson, Faculty of Law, University of Montreal & Founder, Prolaw
Aaron Williams, Coinnections
Sam Lichtenstein
Ryan Ortega, MoneyMarket
Paul Williams, BitPuch
Peter Cramton, University of Maryland
Stefano Capaccioli, CPA, Auditor in Italy, Founder, AssoB.it & Coinlex.it
Andy Yee
Tudor Dimboianu
Justin Stroud
Mike Fallon
Rishi Nair, Koinyx LLC
Andrew Vegetabile, Director, Litecoin Association
John Betts, Noble Markets
Phillip Danner, CIO, Koinyx LLC
Scott Robinson, Director, Plug and Play
Leon-Gerard Vandenberg, bitSIM Holdings Ltd
[1] “The World Bank calculates the average fee on remittances at 8%, yet charges can be three times as high.”
http://www.theguardian.com/global-development/2014/aug/18/bitcoin-remittances-market-digital-cash[2]
http://www.coindesk.com/new-york-bitcoin-job-fair-shows-demand-bitcoin-%20wage-payments/[3] One example of such a standard is a new set of proposals developed by industry leaders:
http://blog.cryptoconsortium.org/ccss/Note: we intend to send this letter to other states proposing similar regulation with the relevant references changed.
