It is still possible to stop New York’s BitLicense regulation? A court will next month hear arguments that the New York Department of Financial Services (NYDFS) did not have the authority to introduce such rules.
Many in the Bitcoin and cryptocurrency industry blame the state’s 2015 BitLicense regulations for stifling financial innovation and protecting big players. So far only five companies have received the license. Four decided to leave New York State, and a number of others now decline New York resident customers.
A legal challenge by Bitcoin entrepreneur Theo Chino will get its first hearing on 4th May in New York City. It’s been a long time coming — Chino first filed his petition in October 2015, right after BitLicense was introduced.
Speaking to Bitsonline, Chino said he’s prepared to fight the case all the way to the US Supreme Court, but is appealing to the community for the financial resources to help fight it.
The Bitcoin Foundation, of which Chino is a member, is organizing a donation drive.
The challenge under New York’s Article 78 hinges on two premises: (a) that the New York legislature never granted NYDFS the authority to regulate on Bitcoin, and (b) the regulation is arbitrary and capricious, and/or an abuse of discretion.
Delay as Government Had to Re-Learn Bitcoin
Chino acknowledged the hearing comes a long time after BitLicense began to have an impact. However the New York State Attorney General’s office, which argues on behalf of state agencies, needed more time to learn Bitcoin’s complexities.
“The people with Bitcoin knowledge within the NYDFS did leave the agency causing the Attorney General with little experience to work the case. They asked for several postponements; then it took some time for my lawyer to answer — I needed time to train him on what bitcoin is.”
Even the man who proposed and oversaw BitLicense, NYDFS head Benjamin Lawsky, left the agency to start a private consultancy soon after the regulation was enacted. His website mentions that he was one of the “Top 10 Most Influential People in Bitcoin”.
Chino’s counsel, Pierre Ciric, explains Article 78 in this video:
Jim Harper, the Bitcoin Foundation’s Global Policy Counsel, also wrote a detailed background to BitLicense and the challenge. Harper will not play a formal role in the NY case but has the experience to advise at a federal level once/if all state appeals are exhausted.
The Foundation estimates it will cost $100,000 to $200,000 to pursue the case to fullest extent. Chino has a campaign page here, and is accepting donations via bitcoin as well as other channels.
Industry members fear that New York’s regulation, one of the first of its kind, might serve as a model for other jurisdictions. In Japan, Indiesquare’s Koji Higashi suggested his country’s new digital currency laws may have a similar chilling effect.
NY Regulator Didn’t Listen to Industry Before Introducing BitLicense
Chino admitted the Bitcoin Foundation had once lobbied the NYDFS for bitcoin-specific regulation, as did the Electronic Frontier Foundation (EFF). However, he added, the NYDFS ignored their arguments.
From 2013 to 2015, Chino ran a startup to help small stores accept bitcoin in New York, before BitLicense stifled “the whole project”. He has since devoted all this time to pursuing his legal challenge, making it tough to keep up.
“I have not followed up as I wished all the advances such as Segregated Witness or the whole fork discussion. I do try to make every NYC Bitdev Meetup just to keep track of the technology.”
The first hearing will take place at the New York State Supreme Court starting 9:30am on Thursday 4th May, 2017. Bitcoiners are organizing a meetup group for any interested parties to attend.
Is this case worth pursuing? Does regulation like BitLicense go too far? Let’s hear your thoughts in the comments.
Images via Pixabay, NYDFS