New York regulations are an enormous disappointment
Today, we saw perhaps the greatest disappointment in the history of bitcoins. /u/BenLawsky proposed what many people are commonly referring to as "BitLicenses." The document that was published is the worst possible outcome of the process and will destroy cryptocurrency innovation in New York.
/u/goldcakes points out some of the more pertinent restrictions at http://www.reddit.com/r/Bitcoin/comment ... he/cizyqyz. In short, almost everyone who has anything to do with bitcoins needs to get one of these licenses. Of course, the licenses require paying fees to the "superintendent," and going through a protracted legal process of waiting 45 days or even more, so startups aren't going to be getting them.
The licensing is so horrendous that people will be considered criminals if they create altcoins, sell bitcoins to another person at work, operate a mining pool, sell unfunded coins or cards that have private keys on them, and more. The real name of customers needs to be retained, even for small transactions, so that a main benefit of bitcoins (not providing personally identifiable information where credit cards were previously necessary) is lost. Unbelievably, companies are required to hold the cash reserves in dollars, not bitcoins, even if they have enough money to back their customers' assets.
Fortunately, there are other states around, and none of them have licensing requirements like this, so what the regulations are likely to do is to simply cause people to move or close down. This is government corruption at its finest. The only people who can possibly comply with these regulations are large, rich banks, who undoubtedly had a lot of influence in the creation of this document. The likely outcome of this is that huge banks are going to take over the bitcoin business in New York, and innovators will be located elsewhere.
Not only is this hugely disappointing to the community, it is hugely disappointing to me. We just invested $6k into hardware for a mining pool where a group of people from New York is interested in being the first customers. Unless this document changes before it becomes active, I don't see how any deal can be made at this point, which places the entire pool's future in jeopardy. It would be a shame to have to add a disclaimer that the service is available everywhere except in New York.
Up until recently, people hailed Lawsky as someone who understood virtual currencies and who was trying to make New York a great place for people to get involved in the space. It turns out that he was just trying to make himself look good all along. Judging by the comments in /r/bitcoin, few are going to welcome him on reddit any longer.
Note: I edited this post to point out that Business Insider makes a good point of how there are so many people required to comply with the regulations that it is unlikely that the price of bitcoin processing will be less than that of credit card processing should this come to pass.
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