Major Bitcoin Exchanges Kraken, Bitfinex “Escape from New York” Ahead of BitLicense Deadline
The moves are ahead of New York State’s requirement that all persons engaging in virtual currency business activities involving New York state residents apply for a BitLicense by August 10th, 2015. The so-called BitLicense is issued and regulated by the New York Department of Financial Services.
Hong Kong-based Bitfinex released the following statement on Friday:
All New York Residents must withdraw all cryptocurrency balances currently held on Bitfinex by 4:00 pm EDT on August 15, 2015. We strongly encourage New York Residents to specify ‘Locked Withdrawal Addresses’ that we will use to automatically sweep any funds that may be sent to one of your deposit addresses in the future. Failure to set these Locked Withdrawal Addresses will result in the automatic liquidation of future deposits.
Bitfinex stated further that its New York customers could also no longer have access to the exchange, margin trading and swaps market services.
San Francisco-based exchange Kraken declared “Farewell, New York” in its corporate blog.
While we’re sure that the protection from New York law enforcement is valuable, it comes at a price that exceeds the market opportunity of servicing New York residents. Therefore, we have no option but to withdraw our service from the state. Clients living in New York who wish to continue enjoying our award-winning service are encouraged to escape across the border before the consumer protective walls are erected around the state line.
Kraken’s issues with the BitLicense include the following:
- no guarantee of support from New York banks
- no guarantee of enforcement against unlicensed competitors
- reduced consumer protection
- unjustifiable burden and restrictions on global operations
- unjustifiable bifurcation of the service for New York alone
- unjustifiable expense for the opportunity to compete for the small market
- no exemption from traditional money transmission licensing
- no onramp for small businesses
- dubious value to the consumer
For some in the cryptocurrency space, it is the cost of complying with the BitLicense that is problematic rather than the regulation itself.
Mike Cabaniss, President, ArtByte Foundation, Inc, told AllCoinsNews recently:
We have made a difficult decision today. We have decided to withdraw from the NY market because of the cost and complexity of the BitLicense.
ArtByte is a non-profit corporation providing support for artists globally through digital currency and blockchain technology. The firm’s management has determined that the costs associated with complying with the BitLicense regulations far exceed those of other jurisdictions and make it difficult to operate.