Coinbase can breathe easier: The digital currency exchange has won a formal license from the New York State Department of Financial Services (NYDFS) to do business in that state. Coinbase had been operating under a “safe harbor” license before receiving what people in the industry sometimes call a “BitLicense” in honor of the big papa of digital currencies, bitcoin.
As part of its licensing process, NYDFS conducted a comprehensive review of Coinbase’s anti-money laundering, capitalization, consumer protection and cybersecurity policies. Coinbase, which is subject to ongoing supervision by NYDFS, offers services for buying, selling, sending, receiving and storing bitcoin.
Coinbase launched in 2012 and has raised at least $110 million in venture capital. As of Nov. 2015, it had about 2.8 million users, according to the company. Late last year, Coinbase—in another move that’s helping bitcoin go mainstream—partnered with Shift Payments to launch a Visa-branded bitcoin debit card. The Shift Card connects a user’s Coinbase bitcoin wallet to the plastic card, which can be used to make in-store and online purchases at 38 billion merchants worldwide, along with ATM withdrawals, by converting bitcoin into local currency. And last month, another digital currency company, iPayYou, said its bitcoin technology now enables coffee and food purchases at Starbucks.
NYDFS has approved five firms for virtual currency charters or licenses, while denying those applications that did not meet the agency’s standards, according to an announcement. In addition to Coinbase, DFS has granted licenses to XRP II and Circle Internet Financial, and charters to Gemini Trust Company and itBit Trust Company. The companies that have received application denial letters ordering them to stop any New York operations are ChangeCoin Inc., Ovo Cosmico Inc., Snapcard Inc. and OKLink PTE. LTD.
The U.S.’s first state-level framework for licensing digital currency companies, the BitLicense, was seen by some as an important step in the long-term development of the digital currency industry. However, many industry stakeholders warned that the licensing requirements were too onerous and could stifle innovation in the sector, especially among startups. Another worry was that providers would simply stop providing services in New York—and since the licensing requirement went into effect, several digital currency firms have done just that.
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