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Two major bitcoin companies decided to leave the State of New York because of BitLicense.

Two of the most prominent bitcoin marketplaces will not operate in New York anymore. In order to use their services, New Yorkers would have to cross the state border. The marketplaces explain that their decision was the result of the onerous rules and fees imposed by the New York Department of Financial Services. For instance, Local Bitcoins, the largest p2p bitcoin exchange in the world, remarked in their blog that under the new bitcoin regulation, any seller from the Local Bitcoins network would have to apply for BitLicense and pay $5,000. They also stated:

“This is an unfortunate state of affairs and we hope that the regulation will in the future accommodate small time bitcoin sellers who do not have the possibility to comply with regulations made for big financial institutions. For the time being though, we bid New York farewell.”

Jad Mubaslat, the founder of the bitcoin trading platform BitQuick, also protested against the application costs:

“$5,000 for a new startup is a deep expense. When you’re talking about many companies who are in pre-seed stages, they don’t even stand a chance to try. New York isn’t a problem now; we’ll have to wait for them to come around. But if other states followed suit, there would be a serious chokehold on innovation. Innovators would flee to unrestricted states or territories.”

Other worrying factor for BitQuick is the requirement for the bitcoin companies registered in New York to collect sensitive customer data. According to the PleaseProtectConsumers campaign originally started by ShapeShift and now joined by GoCoin and BitQuick, private information collected from customers “inevitably becomes a target for hackers and other malicious actors”.

CoinFox followed the reaction of different bitcoin companies to the BitLicense. In June, ShapeShift was the first to leave New York, even before the final adoption of the law, stating that “it’s a moral and ethical stand”. It was followed in August by Kraken and Bitfinex. Other companies choose to get licences in New York. The first to become fully licensed was ItBit, in May 2015. Recently, Gemini and Coinsetter have also applied for BitLicense.

 

Alexey Tereshchenko