BitLicense may soon become a regulatory requirement for crypto businesses in 5 more US states. The Aquarian Advocacy Group (TAAG) which was officially launched the previous week is all set to defeat BitLicense legislation before it spreads its wings and tries to “crush innovation.”
Adverse Affect for Crypto and Blockchain-Based Business
Presently, only New York and Washington have BitLicense as a regulatory requirement. However, as per the Aquarian Advocacy Group, California, Hawaii, Nevada, Rhode Island, and Oklahoma could soon be adopting this regime. This, in turn, could adversely affect the crypto businesses in these states.
The former was first introduced in New York in 2015 and is a business license that companies involved with crypto must receive if they are to carry out business activities in a given jurisdiction.
However, the regulation excludes those that utilize digital currency only for the purchase or sale of goods or services. Also, “firms chartered under the New York Banking Law to conduct exchange services and are approved by DFS to engage in Virtual Currency business activity” aren’t required to have BitLicense. Each firm that has BitLicense has to submit its quarterly financial statements within 45 days.
Furthermore, in order to deal with money-laundering, fraud, and cybersecurity, BitLicense requires companies to fulfill several requirements and compliance with its processes and policies.
Crypto Companies Would Need To Share Customer Data
The latest lawsuit filed by Pierre Ciric, the plaintiff’s lawyer stated,
“DFS, of its own initiative, and without the New York State Legislature’s mandate instructions, adopted a regulatory scheme (commonly called the ‘BitLicense’) to quash the growth of cryptocurrency-based businesses in New York.”
If in case the bill is passed, blockchain and crypto-based companies will have no option but to hand over consumer data to regulators. The companies will have to shell out expensive fines if they don’t comply. Additionally, the companies would need to incur the costs of enforcing such regulations.
TAAG Executive Director Margaux Avedisian said,
“We’ve seen in New York and Washington what happens when BitLicenses pass—a mass exodus of crypto companies from the states. There are already federal requirements, so adding unnecessary state requirements only serves to crush innovation. We are organizing the community to defeat these BitLicenses”
The group further states that the BitLicense’s implementation in California could be detrimental for the state of California as it is home to a large number of crypto startups.
Part of California’s bill reads:
“This bill would… enact the Uniform Supplemental Commercial Law… which would provide rights to virtual currency businesses and their customers based on Uniform Commercial Code provisions. In this regard, among other things, the bill would provide that a licensee or registrant… is a securities intermediary.”
Heavy Penalties for Crypto Companies
If the bill becomes the law, crypto companies in California would need to pay penalties worth $50,000 per day for each violation. While TAAG is still in its nascent stage, the group is composed of both industry professionals and crypto investors throughout the U.S.. The group supports new legislation which seeks to boost crypto innovation while protecting individual rights.
While the bill had its first reading in February, only a few people know about the bill’s existence. Interestingly, a large number of compliance officers had no clue about the bill.
TAAG Retains Support For The Battle Against BitLicense
The bill still has a strong chance of passing. It is backed by the American Bar Association, which has one of the most powerful lobbying groups in the country. However, TAAG is confident of defeating the bill. For the same, the group has retained political consultants that have experience in managing complex regulatory issues for a variety of industries.
This gives them time till January 2020 to garner support for their campaign and create a unified team before the bill gets its second reading in 2020. Now that TAAG has launched, it is also likely that regulators could try and push the bill through early in the next session.
By Supriya Saxena