Boost VC CEO Adam Draper has launched a petition seeking a number of changes to New York’s proposed BitLicense framework.
The petition calls for New York regulators to limit the amount of information they gather on virtual currency startups to what is mandated by federal standards; that the BitLicense avoid using duplicative language already enshrined in federal law; and that regulators give their approval for what Draper calls a “sandbox of innovation in the financial markets”.
In a video accompanying the petition, Draper stated that the changes are needed to reduce startup costs for digital currency businesses. He estimated an initial cost of $2m for a company seeking a BitLicense, with $1m per year in additional costs.
Draper told CoinDesk that these expenses include the costs of hiring compliance officers, meeting reporting standards, collecting necessary information, AML/KYC expenditures and associated legal costs.
He went on to state that the BitLicense would make it difficult for accelerators like Boost, which provider early funding to potential innovators, to support nascent startups in the digital currency space, explaining:
“The BitLicense frame work will definitely impair bitcoin startups from starting, which would impact my business negatively. My business is to drive innovation in technology, and over-regulation stops technology. It will not hurt the companies who have been well funded, or large funds, it will hurt the early staged startups.”
More changes needed
According to Draper, the revised BitLicense marks an improvement over the initial draft but still leaves digital currency startups at a significant cost disadvantage. His comments echo those of Union Square Ventures principal Fred Wilson and others who have commented on the reworked proposal.
“When I read the second draft, although much more thought through than the first, I felt that it would still be too expensive for startups to get through,” he said.
He characterized the proposed changes as good for both sides, adding: “I think it balances the regulatory framework with what entrepreneurs need to thrive.”
Further, Draper conceded that he had missed the end of the second comment period but still wanted to contribute to the process of developing the regulation. In part, he said, the petition aims to bring others into the conversation who might have otherwise missed the opportunity to do so.
On-ramp for innovation
Draper told CoinDesk that regulatory breathing room for startups would allow for the potential creation of new, innovative financial products, but said that the presence of onerous regulations makes it difficult for such work to take place.
“As of now, regulations strike fear into innovators rather than assist them in producing better products. Regulation should be about protecting the end consumer, but we are getting to ‘1984’ level watching over shoulders,” he explained.
Describing the sandbox idea as a win-win for regulators, Draper suggested that startups working elsewhere in the US financial landscape would benefit from similar accommodations.
“It would be great if a bank could start and attempt to operate as a bank with 10 to 20 accounts, before they file to become a bank, which costs $25m,” said Draper. “Or a brokerage to operate as a broker with a smaller amount of volume and users.”
The petition comes shortly after the close of a 30-day comment period for the New York Department of Financial Services’ (NYDFS) proposal to regulate digital currency businesses in the state.
The agency released its revised BitLicense proposal in February.
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