Abolishing BitLicense

So, the Financial Services Department in New York (NYDFS) rolled out this thing called "BitLicense." Basically, it makes it illegal for companies and people to deal with crypto in New York or to help out residents there unless they have this license. They also have to keep records for up to seven years and hand over personal info to NYDFS if asked. Theo Chino is challenging this by filing Article 78 to get rid of BitLicense. Curious to hear what you guys think about it.

Look at how restricted life is for the average NY state crypto user. That pretty much says it all. Regulation that inhibits usage that brutally is clearly failed regulation. It's also telling that no other state has implemented anything remotely like it.  It would be interesting to know how many times a framework was deemed a piece of shit and revoked. It can't happen too often.

So does this mean that even crypto traders and miners not involved with any crypto projects are also required to have a license in order to trader and mine cryptocurrencies? If that is the case then this sucks, if I'm a resident in New York I would be more than bummed and pissed because the state I am living is acting like I need to have a license before I get in touch with the crypto industry. With how the BitLicense is built I know that the main reason they are doing this is for KYC and tax purposes for individuals and they want to regulate what projects will come to the state of New York. I just hope that they haven't included individuals who are just involved with regular crypto activities it's really too much for them just to enter the crypto market.

This is generally true -- regulators are part of the executive branch. They have authority to interpret and enforce the law, not to write it. I never paid much attention to the procedural details of the BitLicense implementation. I always assumed it was championed by the DFS but ultimately passed by the legislature. Is that really not the case? According to Wikipedia, the DFS -- a non-elected body -- just created new law. That doesn't seem legitimate:

I don't think that its true. Even if I do disagree with the whole BitLicense requirement thing a regulation is way different compared to a law created by their lawmakers. Regulations can be quickly imposed by any department part of the government as long as it involved them in fact regulations don't even exist if they don't create one. If the executive branch (the president) can create executive order (EOs) then also regulators can create regulations. It's the same thing what the US SEC is doing imposing and creating regulations involved in the crypto industry, Chino's argument is really wrong given on this situation. The better approach would be targeting the regulation itself on how it is unjust for the New York citizens involved or want to be involve in the industry.

The SEC is not creating new regulations. They are only applying existing laws like the Securities Act and Securities Exchange Act. These laws were loosely written such that cryptocurrency-based securities still fall under SEC jurisdiction. The same goes for the CFTC, IRS, FinCEN -- they issue guidance regarding existing laws but they don't write new laws. The New York state governor can make executive orders, but the DFS cannot. I am no expert on New York constitutional law, but I see no obvious reason why Chino and his lawyers are wrong.

very interesting legal theory. i have to admit, the way the bitlicense regulations were enacted doesn't exactly jive with the "government checks and balances" they taught us about in school. laws are only supposed to be passed by elected officials! these guys (theo chino and his lawyer pierre ciric) have been trying to mount a legal challenge to bitlicense for 3+ years though. it doesn't seem like they've had much luck, which casts some doubt on the prospects of this challenge.

Just a quick search just confirms on what I am saying that agencies part of the executive department can not only enforce regulation but create them as well it is call "rulemaking" under the Code of Federal Regulations they can create their own regulation as long as it abides the current and existing laws of the USA or in a particular state. The regulations they make have the full power to act as a law since it abides by them as well if they aren't stepping any law with their regulations it is deemed allowable for their country. You can check out different answers in Google but you will see mostly the same answer that they are in fact rulemakers.

Emphasis mine. I'm aware that regulatory agencies promulgate regulations -- but they cannot be created out of thin air. At the federal level: In other words, a federal regulator needs statutory authority from Congress to promulgate regulations. They can't simply grant themselves new powers, which is what the DFS did. If you read the administrative rules, there is not a single reference to existing statutory law. What law is it based on? Regulators passing new laws without statutory authority is a clear constitutional issue. This is like a police department rewriting the laws they are tasked with enforcing. They are rulemakers, not lawmakers.

I don't get it. People keep asking for legislation, licenses, and other legal frameworks and now they complain about the results. And their arguments to say that Bitlicence is too intrusive is debatable. About the sensitive information, any other company unrelated to cryptocurrency do the same, more or less, for accounting and other things (IP address, name, etc) It requires the records to be kept for 7 years of each crypto TX carried out by the company. Ok, but it's already available publicly on the Blockchain, and as the company primarily needs to records your address... Using centralized services has a cost, your privacy, if people want to use them, in this case, they're not eligible to say it is 'too intrusive'. For the sake of the crypto ideology?. Oh yeah, with a centralized service... Start to follow the decentralized model so. If the NYDFS is not entitled 'to invent' regulation, then what? A law won't be much different if they think a statute will be less intrusive...

I definitely wasn't asking for it. I don't think anyone was asking for something so severe as the BitLicense. Four years later, less than 20 cryptocurrency services in the world can operate in New York. That alone indicates what a massive barrier to market entry it is. It doesn't have to be so black and white. We can support more sensible and less burdensome regulations. There was at least one bill submitted in the New York Assembly that would repeal the BitLicense regulations in favor of a less burdensome state audit system. Legislators have had four years to watch the BitLicense cripple the industry in New York. At this point, if it were repealed on constitutional grounds, we might find the legislature more receptive to better policy standards.

In my own view, regulations should be in placed to protect the interest of the consuming or investing public and not constrict their choices thus I think BitLicense has gone so far with its intent and purposes...and must be replaced with a better platform. I am not for a free and unregulated market because we will only be victimized by many scammers out there so I am for a balanced approach with the whole matter. Will it be possible to do that --  a balanced approached where all good interests are taken into account? I hope so if there is really a good intention to start with coupled with an innate understanding of the market the regulators are trying to regulate.

If there's to be regulation it should drive the clearly incompetent, dishonest and broke out of markets to benefit average users. Its principles are sound but the lack of uptake is a signal something needs tweaking. Perhaps the companies that have applied really are the only ones that can meet those requirements but I find that hard to believe. For the others it's either too expensive or onerous. It would be interesting to know what is regarded as the most successful crypto regulation is out there and what's different. I think the Japanese version costs several hundred thousand dollars a year to maintain.

If huge exchanges like Bittrex can't meet the requirements, it suggests the regulations are pretty onerous. DFS publicly responded regarding that denial, and bizarrely cited KYC lapses in 2017 as a reason to deny the license in 2019. Regulations should be expected to create some barriers to entry -- that's just a fact -- but New York is strangling the industry. I would feel robbed by the state if I lived there. New York residents are treated like pariahs by cryptocurrency services.