China’s “Big Three” Bitcoin Exchanges Jointly Comment on NYDFS BitLicense Proposal

By August 21, 2014Bitcoin Business
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China’s “Big Three” Bitcoin Exchanges Jointly Comment on NYDFS BitLicense Proposal
China’s “Big Three” Bitcoin Exchanges Jointly Comment on NYDFS BitLicense Proposal

In a true show that bitcoin is global, China’s “Big Three” bitcoin exchanges have come together in order to release joint comments on the recently-released BitLicense proposal from the New York Department of Financial Services (NYDFS).

Those exchanges, BTC China, Huobi, and OKCoin say that their are some fundamental issues with the proposals — which are currently in the midst of a 45-day commenting period.

They write:

We express our great appreciation for the historic move by you and the NYDFS to propose a tailored regulatory framework for the virtual currency industry. While we are companies organized under the laws of the People’s Republic of China, we believe that it is not only appropriate, but also necessary for us to express our thoughts on certain aspects of the BitLicense Proposal because the blockchain protocol is decentralized, because regulations in New York have long been given great deference and are modeled after by regulators around the world, and because the BitLicense Proposal as drafted appears to cover us.

Specifically, the exchanges outline three major points when it comes to the BitLicense proposal.

The first is that the proposal set forth should only be covering companies involved with digital currency with a “meaningful connection” with the State of New York.

That is to say, companies who operate even in the most minute fashion in the State would be subjected to the regulations.

This provision could severely impede the development of virtual currency businesses outside of New York. If the proposal were already in effect, without the NYDFS’s prior approval, BTC China could not have rolled out its mobile exchange for virtual currency in China; Huobi could not have acquired a Chinese provider of virtual currency storage services; and OKCoin could not have launched an international version of its trading platform.

The second point is that a BitLicense licensee’s affiliate/s should not be obligated to allow the New York Department of Financial Services to examine records, facilities, and the like if they aren’t related to the licensee’s operations.

The Companies acknowledge the NYDFS’s concerns that a licensee may use affiliate transactions or inter-affiliate outsourcing arrangements to circumvent regulation. But the NYDFS could properly address such concerns by requiring the affiliates of a licensee to provide information that relate, either directly or indirectly, to the licensee.

The third and final point argues that enhanced due diligence (also known as EDD) should be based on “whether the customer and the applicable licensee are from the same jurisdiction instead of whether or not the customer is a U.S. person.”

Specifically, the provision as it stands would not require an Australian licensee to perform EDD on a prospective U.S. customer even if the licensee may not be familiar with AML/CFT risks that U.S. persons present. The provision will, however, mandate EDD when the licensee deals with Australians, the AML/CFT risks of whom the licensee as an Australian business presumably understands better.

The letter, which we have embedded below, is signed by the three companies’ CEOs: Bobby Lee of BTC China, Lin Li of Huobi, and Mingxing Xu of OKCoin.

What do you think of the join comments issued today?

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