China's 'Big Three' bitcoin exchanges, OKCoin, BTC China and Huobi, have joined forces to submit feedback to Benjamin Lawsky, superintendent of the New York State Department of Financial Services (NYDFS), regarding his agency's recent BitLicense proposal.
In a newly published open letter, the three companies criticized the broad reach of the regulations, stating they should only apply to businesses with meaningful connections to New York.
The three exchanges had previously expressed their opinions on the matter in interviews with CoinDesk, demonstrating just how much of a global reach the US state law could have.
At the time, however, only OKCoin indicated that it would seek to submit a formal response to the NYDFS.
Under the proposals, any business that serves customers in New York would be subject to the BitLicense provisions, no matter how tenuous the association.
This would include giving the NYDFS access to all books and records from the company and its affiliates, even if the affiliate's business had nothing to do with New York or cryptocurrencies. Currently, this is not a requirement for regular money services businesses.
The proposals would also require any licensed business to perform 'enhanced due diligence' (EDD) on non-US customers, meaning non-US businesses would be required to perform EDD on customers in their own jurisdictions, but not on those in the US.
This is both time-consuming and ineffective, the Chinese companies said.
Forcing business abroad
A BTC China spokesperson told CoinDesk the company "would need to possess a very strong business case" to justify the company applying for a BitLicense under the current proposals. They also acknowledged that businesses in China "face similar challenges".
, if enacted unmodified, would dampen interest in doing business in the US and reduce willingness to work with US companies, they added.
A statement from Huobi said it would be "extremely difficult to comply", and expressed concern that regulators in other countries may follow New York's lead.
Huobi would "geofence" New York and not apply for a BitLicense if the proposal was enacted, the statement concluded.
OKCoin's manager of foreign operations, Zane Tackett, said:
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.