Theo Chino's Fight to Overturn the Controversial BitLicense

Theo Chino’s Fight to Overturn the Controversial BitLicense

New York business owner Theo Chino has filed an appeal in the Supreme Court of New York County to overturn the ruling which prevented him from challenging the New York Department of Financial Services’ (NYDFS’) implementation of the controversial “BitLicense” regulations in 2015.

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BitLicense an Unacceptable Burden

Chino is the founder of a small business, Chino Ltd, which aimed to provide Bitcoin merchant services for phone calling cards at a number of convenience stores in New York state. According to Chino, BitLicense’s onerous regulations and steep costs were “an unacceptable burden” on his ability to conduct business and the NYFDS’ proposed regulations were outside “the scope of their authority”. With the help of Ciric Partners law firm, Chino originally filed a motion to overturn the regulations infamously enacted by current Ripple advisor and Attorney General candidate, Ben Lawsky.

In pursuing the claim to overthrow the regulations, Chino needed to prove a number of critical assertions; that NYFDS had no authority to introduce laws that were already served by Federal law, that BitLicense is capricious and unjust, that his business had been economically hampered by the regulations, and that he and his business were of good standing.

Chino also asked for ‘limited discovery’ in his claim, which would enable him to dissect the economic nature of bitcoin and also allow him to argue that Ben Lawsky and the NYDFS did not adequately understand bitcoin in 2014 and, as a consequence, were too hasty in implementing the BitLicense regulations. For this aspect of the case, Chino cited New York Times columnist (and renowned bitcoin hater) Paul Krugman.

“License and Registration Please, Sir”

In countering Chino’s claims, the NYFDS attorneys argued that Chino failed to adequately submit his application for a license and that he began filing suit with the New York court prior to even having his application rejected. Chino’s reasoning for this was that due to the cost of the application and ongoing regulatory costs that would be incurred, he was well aware he would not pass the required standards, although he did believe his business was of good standing.

The court, however, sided with the NYFDS, deciding Chino and his business were not of good standing, despite the admission that “[i]n the proper circumstances, the argument that a regulation imposes “an unacceptable burden” on an individual or business is sufficient to establish standing”.

The judge reasoned that because Chino “did not apply for certification and has not shown sufficient economic loss”, his claim did not qualify.

Excessive Costs for Small Business Owners

In the original submission, Chino supplied tax statements for his business, showing losses from 2014-2016, with the latter year having the largest loss at $30,568 USD. He attributed this to the start up costs of his bitcoin-focused business. He further argued that having to pay a $5,000 fee as well as provide information in excess of what fiat money transmitters need to collect, would have further increased costs. The judge did not agree, commenting that because he did not actually pay the fee, and because his company was never profitable (Chino could only prove one sale), the economic loss argument was deemed “insufficient”.

This raises an important point and one which Chino raised when giving testimony at the New York Senate Hearings; Bitcoin can liberate a whole class of people who have traditionally been excluded from finance by offering them a way to do business without excessive start up costs and overheads. The enforcement of the BitLicense keeps that ability in the hands of a select group – the incumbents or at least those willing to maintain the status quo.

BitLicense

Tabloids Go Into Overdrive

Chino’s portrayal by the press would appear to support that claim. The New York Daily News called the former Green party candidate for New York a “Bitcoin kook” for wanting Paul Krugman to testify to the “economic nature” of bitcoin, despite both Chino and NYFDS attorneys agreeing that Krugman is an economic expert.

While this is demonstrates the sensationalist nature of the tabloid press, it also shows how marginalized people and their viewpoints are presented to the masses. The NYDFS attorneys would certainly not have been referred to as kooky for citing Krugman, no matter what the tabloid thought of his economic track record. Chino though, a software engineer whose cause is championing the plight of the lower classes, is labelled with derogatory terminology.

Still, ever the bitcoin entrepreneur, Chino remains dogged in his assertions that the ‘BitLicense’ is unjust. As a self proclaimed ‘pain in the ass’, he continues to maintain that Ben Lawsky did not have the requisite knowledge of Bitcoin, nor did he have the regular person in mind when he proposed the BitLicense, drafting up the regulations “not in response to a pressing need… instead [they were] intended to create a working model for regulated banks and insurance companies.” Bitcoin, Chino says, was still “a hamster compared to the bull of Wall St” in 2014 and didn’t need such onerous regulations. Nor did it need to be labeled a currency when the federal government had already deemed bitcoin an asset.

Consensus Sets the Stage for a Showdown

With much of the cryptocurrency world focusing on the New York ‘Consensus’ conference this week, Chino managed to put his cause in the public eye by calling out what he says is a lack of support from Coincenter, the “leading non-profit focused on the policy issues facing cryptocurrencies like Bitcoin”.

Chino provocatively tweeted to Coincenter Executive Director Jerry Brito, prodding him to follow through on an undisclosed assurance to provide assistance in Chino’s case. Mr Chino plans to stage a protest outside the Coincenter Gala on Monday, May 14th.

When contacted about Mr Chino’s appeal and insinuations, Neeraj Agrawal of Coincenter commented that:

“We support in principle anyone who is fighting the BitLicense because it is an unfortunate and misguided regulation, but we have never offered any specific support to Mr. Chino.”

Chino Fighting the Underdog Fight

There is clearly a difference of opinion here, but it is certainly worth mentioning that Theo Chino is the only Bitcoiner to have attempted to stop the BitLicense through the courts. Being that his was only a small business in a state better known for big businesses and mountains of funding, it seems that many of the New York-based businesses, specifically those in Manhattan, have always intended to work with the current regulatory system at the expense of those who would like to change the system altogether.

For Theo Chino, the professional pain in the backside, the fight in the Appeals Court will continue. Given the nature of bitcoin and the regulatory bodies tasked to corral it, it is unlikely the cryptocurrency community has heard the last from him.

Have your say. Do you support Chino in this battle against BitLicense?


Images via Maxpixel 

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