Bitcoin regulation and more specifically the BitLicense debacle, will be making headlines for many more weeks to come. As the BitLicense application deadline is almost upon us, companies are forced to either apply or halt their services in the state of New York. Several companies have decided on the latter option as very few BitLicense applications are coming in. That being said, it looks like Coinbase, just like Bitstamp, will be applying for a BitLicense.
Major Bitcoin Exchanges Forced To Put Up Or Shut Up
BitLicense is a problem child of Bitcoin regulatory measures; the application costs are quite excessive for nearly every startup company in the virtual currency world today. Only major companies, such as popular Bitcoin exchanges Coinbase and Bitstamp, seem willing to pay the required funds in order to stay in operations in the area.
But that is not the main concern of Bitcoin enthusiasts today, as a large portion of the community feels that BitLicense regulatory requirements are invasive and offensive towards virtual currency users and companies. Any company deciding to “play ball” with state officials may be facing scrutiny from their customers in the long run.
This is not stopping Coinbase from applying for a BitLicense though, as the company feels the costs (both financially and in terms of customer privacy) do not outweigh the benefits of staying in business in the state of New York. This is an interesting decision that may or may not backfire on Coinbase sooner or later.
Other Bitcoin exchanges, including Kraken, Bitfinex and LocalBitcoins, have halted their services due to BitLicense regulatory requirements. All three companies share the same vision, in that state officials have no business snooping around confidential customer records. Additionally, in the case of LocalBitcoins, every individual selling Bitcoin in the area would be forced to apply for a BitLicense, which is absolutely outrageous.
“We can confirm that Coinbase has submitted a BitLicense application. The process was a significant undertaking, but we’re fortunate to have the internal resources and competent team to get this done.” We look forward to working with the DFS (New York Department of Financial Services), as we have with other states, to get fully licensed and continue to serve consumers, merchants and developers across the U.S.” – A Coinbase spokesperson told the Bitcoin media outlets.
Coinbase is on an aggressive plan of expansion in order to be fully compliant in all US states. Even though this process started two years ago, the Bitcoin exchange is still not operating legally in every US state. By applying for a BitLicense, Coinbase wants to set the tone in terms of being willing to do whatever state officials may require.
Turning Their Backs On The Bitcoin Community
Many people will see this decision as proof that Coinbase turned their backs on the Bitcoin community they so desperately want to appeal to. Before the Bitcoin regulatory requirements became official, Coinbase was one of the biggest advocates leading the charge against this type of virtual currency regulation.
Arguments were made by Coinbase of how BitLicense regulation overlaps money transmitter licenses, as well as the Bitcoin guidelines put in place by FinCEN. Additionally, Coinbase argued that these regulatory requirements would eliminate Bitcoin’s open protocol feature and transparency, effectively killing off any innovation.
Whether or not Coinbase has created a huge problem for themselves, will become clear over time. Originally opposing the regulations that they later on decide to comply with by rolling over, is not a good way to build a loyalty relationship with customers. With the Bitcoin community in a state of outrage, Coinbase and Bitstamp could be in dire straits.
Source: Press Release via Email
Images courtesy of NYDFS, Coinbase, Shutterstock