Xapo: New York’s BitLicense Proposal Threatens Consumers

Pete Rizzo
Sep 3, 2014 at 17:48 UTC
Updated Feb 4, 2019 at 22:02 UTC

Xapo has announced that it will exclude customers residing in New York should the state’s BitLicense proposal pass in its current form.

Penned by founder and CEO Wences Casares, Xapo’s blog post joins a growing chorus of bitcoin companies that have issued public statements on the matter.

In August, on behalf of bitcoin services startup Circle, CEO Jeremy Allaire criticised issues in the proposal that he said could “discourage innovation”.

Casares builds on Allaire’s arguments throughout, stating that while Xapo is not against smart regulation, New York’s proposal overreaches. As a result, he argues, it threatens not just the wider digital currency ecosystem and its potential to grow and innovate, but consumers as well.

The CEO said:

“New York’s proposed BitLicense in its current form is the wrong form of regulation and in fact poses a threat to New York and New York consumers. […] We believe that at this early stage in bitcoin’s history, investing the time needed to arrive at the right regulation is time well spent.”

Regulation that hurts the industry will also harm consumers, who may be forced to use inferior financial services, Casares added, stating:

“The provision of services simply will not be up to the standards that we aim to provide, and New York consumers will suffer the consequences.”

Casares went on to criticize New York’s BitLicense proposal as anti-competitive, given that it would favor well-capitalized companies. The comments are notable as Xapo now leads the bitcoin industry in total VC funding.

Launched in March, Xapo has raised $40m to date. The company offers bitcoin wallet, storage, and most recently, brokerage services.

Timely and deliberate action

Like many of his peers, Casares praised New York’s regulators for their willingness to engage with the industry on crafting regulations. He lauded New York’s decision to extend the comment period for the regulation in light of feedback for the industry.

New York, Casares said, would be wise to continue to adopt this collaborative approach:

“We are at a pivotal time in the bitcoin industry and New York has an opportunity to achieve a leadership role in the space. To do so, however, we believe NYDFS should carefully consider the concerns of the broader bitcoin community regarding the substance of the BitLicense and consider a more orderly timeline for its adoption.”

Casares further offered the assistance of his legal and compliance teams to New York regulations. Still, he said that he believes regulators have much of the tools they need to police bad actors in the bitcoin industry, adding:

“We believe the existing regulatory landscape, such as regulations applicable to money transmitters, are sufficient for purposes of consumer protection.”

Self-regulation with assistance

While Casares was critical of New York’s proposal, he emphasised that the right regulation will benefit the bitcoin industry and empower it to serve consumers with more robust offerings.

In particular, Casares cited bitcoin’s use in illegal marketplaces such as Silk Road and the collapse of the market’s once-leading exchange Mt Gox as obstacles the industry has met and overcome.

Casares praised the work of the entire bitcoin ecosystem, naming companies such as BitGo, BitPay, Bitstamp, Circle and Coinbase as those leading the way for the industry to embrace new solutions that make owning and using bitcoin safer, stating:

“The goal is to boost customer protection and confidence – and we as an industry have done so because our customers, not regulators, demand it.”

Casares concluded by stating that Xapo intends to file formal comment on the NYDFS proposal and that it will alert the bitcoin community through its blog when it does so.

New York sidewalk via Shutterstock

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