on the crypto
When BitLicense was introduced in 2015, 15 crypto companies including some international ones such as Bitfinex from Hong Kong and the Swiss ShapeShift (which operates from Denver) had to cease operations in New York.
Difficult but not impossible
The New York Department of Financial Services (NYDFS) has approved 25 companies that have been working in virtual currency services for the past five years. Of these, four are based or were born outside the United States, including: BitFlyer, based in San Francisco founded in Japan; Bitstamp, based in Luxembourg; Xapo Holdings, based in Hong Kong, and ItBit, founded in Singapore and renamed Paxos in 2016.
Bitstamp and Xapo were among the first nine companies to apply for the license together with Bittrex and MonetaGo based in the United States in 2015. The first two managed to obtain it. But last year, in Bittrex and Bitcoin Revolution, the license was denied, while MonetaGo of New York closed its exchanges and repositioned its objectives in the development of blockchain technology.
Favor already regulated companies
Tokyo-based BitFlyer was the first international entity to receive a BitLicense NYDFS. At the time of the application, it was already regulated by the Japanese Financial Services Agency. David Zacks, BitFlyer's U.S. Chief Compliance Officer, said the fact that it was already regulated made the application process easier for the company.
One of the largest cryptocurrency exchanges in the world, Bitstamp, was granted a BitLicense in 2019, four years after applying. Bitstamp's US operations manager Hunter Merghart said that "Bitstamp [was] already regulated by the CSSF in Luxembourg for a number of years.
We believe this, among other factors, has helped demonstrate to NYDFS how seriously Bitstamp considers regulation. " Xapo Holdings, which obtained the license in 2018, was already conducting operations in Europe at the time and Xapo (Gibraltar) Limited was regulated by the Gibraltar Financial Services Commission.
Doing business in New York
In addition to an exhausting information gathering process, BitLicense cost Bitstamp up to $ 100.000 in commissions and time spent on the application. But according to Merghart, being able to serve customers in New York has helped Bitstamp gain revenue and market share.
"Obtaining a Bitlicense has also helped build relationships and partnerships with other high-quality companies that are entering the crypto sector for the first time but feel more comfortable in dealing with regulated entities," added Merghart.
Also for BitFlyer, the license to operate in New York was an opportunity that helped the company expand its global operations. "The United States is a large market, and represents an extra step for exchanges that have grown internationally, feel confident in their offerings and preparedness as an organization to comply with local regulatory requirements," said Zacks.
