Contents
A comprehensive guide to the legal status of cryptocurrency in New York state, including a discussion of the Bitlicense.
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Introduction
New York has been a hotbed of activity for the cryptocurrency industry. From startups to exchanges, many companies have chosen to set up shop in the state. However, the regulatory environment for crypto in New York is still evolving. So, is crypto legal in New York?
The simple answer is yes, cryptocurrency is legal in New York. However, there are some caveats. For example, while you can legally buy and sell cryptocurrencies like Bitcoin, you cannot use them to pay for goods and services. This is because New York has not yet issued any guidance on how cryptocurrencies should be treated for tax purposes.
Another issue that needs to be addressed is whether or not cryptocurrency exchanges are subject to the same regulations as traditional financial institutions. The answer to this question is still unclear, as the state has yet to issue any definitive guidance on the matter.
As the regulatory environment around cryptocurrency continues to evolve, we will update this article accordingly. In the meantime, if you have any questions about the legality of crypto in New York, feel free to reach out to our team of attorneys for guidance.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Cryptocurrency is also considered to be a decentralized currency because it is not subject to the control of any single entity (like a central bank). Decentralized cryptocurrencies are produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrencies, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.[23]
What is the NY BitLicense?
The NY BitLicense is a license that is required for any business dealing with cryptocurrency in the state of New York. The license was introduced in 2015, and since then, only a handful of companies have been able to obtain one. The process to obtain a BitLicense is long and expensive, and many companies have decided not to bother with it due to the cost and the hassle.
What are the requirements for the NY BitLicense?
In order to obtain a BitLicense, a company must meet certain requirements set forth by the NYDFS. These requirements include:
– having a good faith, physical presence in New York State
– being incorporated in New York State or qualified to do business in New York State
– demonstrating that it is adequately capitalized
– providing evidence of a robust compliance program, including AML/KYC procedures
– submitting fingerprints for each of its principals
– paying a non-refundable application fee
How to apply for the NY BitLicense?
In order to legally operate a cryptocurrency business in New York, you must apply for and obtain a BitLicense from the New York State Department of Financial Services (DFS). The NY DFS has published clear guidance on the types of businesses that require a BitLicense, and the application process.
If you are thinking about starting a cryptocurrency business in New York, or if your business already accepts or holds cryptocurrency, you should consult with an experienced attorney to ensure that your business is in compliance with all applicable laws and regulations.
Are there any exemptions to the NY BitLicense?
There are a few limited exemptions to the NY BitLicense requirements, including for:
-Virtual currency businesses with less than $10,000 in gross revenue from NY-based activities in a calendar year
-Non-profit organizations
-Certain vendors of online goods and services who accept virtual currency as payment for such goods and services
-Merchants and consumers who use virtual currency solely for the purchase or sale of goods or services, or hold virtual currency as a personal investment
Conclusion
Yes, cryptocurrency is legal in the state of New York. The Bitlicense, which was introduced in 2015, provides a regulatory framework for businesses that deal with cryptocurrencies. The Bitlicense has been criticized by some as being too restrictive, but it is generally seen as a positive step by the state of New York in legitimizing the cryptocurrency industry.
