In what appears to be a continuous wave of BitLicense disapproval, the three largest Chinese Bitcoin exchanges joined the ever-growing ocean of discontented Wednesday when they sent their own formal comments to Ben Lawsky and the New York Department of Financial Services (NYDFS) over the proposed BitLicense regulations.
The CEOs from BTC China, Huobi and OKCoin combined their comments into one letter addressed to Lawsky, which began by stating how the current BitLicense proposal will negatively affect them all the way over there in China.
“While we are companies organized under the laws of the People’s Republic of China, we believe that it is not only appropriate, but also necessary for us to express our thoughts on certain aspects of the BitLicense Proposal because the blockchain protocol is decentralized, because regulations in New York have long been given great deference and are modeled after by regulators around the world, and because the BitLicense Proposal as drafted appears to cover us.”
The BitLicense proposals cover these Chinese exchanges because if they choose to do business with just one resident of New York, the Chinese exchanges must adhere to the proposals, which is asking quite a lot of a company located on the other side of the world.
The Chinese companies, whose primary function as businesses is to convert fiat into virtual currency, include three main requests in their joint comments to the NYDFS.
Their first request is that BitLicense should only cover virtual currency businesses with “meaningful connection to the State of New York,” because “a single New York customer would be sufficient to subject each of the Companies to the full suite of regulatory requirements under the BitLicense Proposal.”
While the companies say they agree that some virtual currency businesses who are not physically present in New York could and should be required to adhere to the BitLicense proposals, they say that regulating international businesses that have only “inconsequential contacts” with New York may “offend the traditional notions of fair play and substantial justice,” citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) as justification.
“This provision could severely impede the development of virtual currency businesses outside of New York. If the proposal were already in effect, without the NYDFS’s prior approval, BTC China could not have rolled out its mobile exchange for virtual currency in China; Huobi could not have acquired a Chinese provider of virtual currency storage services; and OKCoin could not have launched an international version of its trading platform. The Companies would also be required to, among other things, submit as a part of their BitLicense applications fingerprints of all employees (most of whom are Chinese citizens) to the U.S. Federal Bureau of Investigation. § 200.4(a)(5)”
The companies request that the NYDFS revise the definition of “virtual currency business activity” to a more appropriate definition.
Their second request states that NYDFS should not be allowed to examine the facilities, books, and records of a licensee’s affiliates that are unrelated to the licensee’s operations.
“The BitLicense Proposal provides that ‘each Licensee shall provide the Department, upon request, immediate access to all facilities, books, records, documents, or other information maintained by the Licensee or its Affiliates, wherever located.'”
Essentially meaning that the BitLicense proposals grant the NYDFS the right to examine the entire corporate family of a licensee’s extended businesses, even those unrelated businesses that have no involvement with the licensee’s virtual currency subsidiary and hold no BitLicense.
The third and final point made by the Chinese exchanges is, “The test for whether the performance of enhanced due diligence (“EDD”) on a customer is necessary should turn on whether the customer and the applicable licensee are from the same jurisdiction instead of whether or not the customer is a U.S. person.”
This provision effectively forces non-U.S. licensees to always perform EDD instead of ordinary due diligence, yet fails to require EDD in some cases where it might be appropriate.the provision as it stands would not require an Australian licensee to perform EDD on a prospective U.S. customer even if the licensee may not be familiar with AML/CFT risks that U.S. persons present. The provision will, however, mandate EDD when the licensee deals with Australians, the AML/CFT risks of whom the licensee as an Australian business presumably understands better.
The companies request that NYDFS revise BitLicense so that “what triggers EDD would be whether a customer is from the same country as the licensee, and not whether the customer is a U.S. person or not.”
The letter is signed by the CEO of BTC China, Bobby Lee, the CEO of Huobi, Lin Li, and the CEO of OKCoin, Mingxing Xu.
Latest posts by Coinbuzz (see all)
- Will bitcoin be a good investment in 2016? - June 30, 2016
- BitPay Partners With New York Stem Cell Foundation - October 1, 2015
- Imperial College London Inaugurates Cryptocurrency Centre - September 29, 2015