Logging into Localbitcoin.com for a quick bitcoin purchase just may be a bit more challenging for New Yorkers this morning. Localbitcoins.com has joined Kraken, BitFinex, and numerous other digital currency company's in the march out of New York, and has discontinued service to the state due to the regulations (23 NYCRR 200) now prohibiting the sale of Bitcoin without a Virtual Currency License (BitLicense).
The above notification prompt requires users to immediately identify and discontinue using the service if they are residents of New York.
Localbitcoins.com is a peer-to-peer trading platform that allows it's users to create advertisements to buy and sell digital currency with cash, credit cards, Paypal, and just about anything else you can think of.
[Updated] The Localbitcoins community manager, Max, posted this statement publicly:
We’re sad to say that due to regulators another region has had to be blocked from LocalBitcoins. From today onwards users from New York are no longer allowed to use LocalBitcoins because of the legislation known as the BitLicense (23 NYCRR 200) which makes it a federal offense to sell virtual currency unless you have applied for the license.
This new regulation would require anyone selling Bitcoins through our service to acquire the Bit License if they sell Bitcoins to residents of New York. As the Bit license is time consuming, expensive and difficult to obtain for anything but large companies we’ve taken the decision to protect our US based traders and not allow New York based users to use our service.
If you reside in the US, you will get a one-time pop up notification requiring you to confirm whether or not you live in New York. All new users will equally have to answer the same question.
This is an unfortunate state of affairs and we hope that the regulation will in the future accommodate small time bitcoin sellers who do not have the possibility to comply with regulations made for big financial institutions.
For the time being though, we bid New York farewell.
On June 3rd, the New York Department of Financial Services issued its final virtual currency license rule after nearly two years of debate and feedback. August 8th, 2015 ended the 45 day grace period allotted for operations related to transactions involving any form of digital currency to operate without a license.
A BitLicense, is required for any individual, or business, to conduct any form of business activity with New York State or a resident of, or business within the jurisdiction of, the State of New York, in the State of New York, from any other state in the United States, or from any other country in the world, as defined by the regulations of 23 NYCRR 200 in full effect as of August 9th, 2015, and the last day to apply for the license was Monday August, 10th.
This is not to say you cannot apply today, it just means that there's a portion of the application where you have to outline every single coin purchased or sold, and explain why you didn't file on time.
Colonoscopy or BitLicense?
Taking a look at the application, which is 31 pages long mind you, and now having gone through the document numerous times, I can honestly say, am not sure which is worse, the Application for a BitLicense, or having a Colonoscopy publicly administered while TSA agents film training material with national news media providing live coverage in the security screening line at the Denver International Airport during peak Ski Season.
I almost think the latter would be less intrusive because short of a DNA sample extracted from whatever it is that they manage to scrape out of the aforementioned colonoscopy, there's not going to be much else the NYDFS isn't going to know about you after the application process is complete.
Companies of all sizes have been marching out of New York in both protest and self-survival.
Surviving the process itself requires copious of amounts of additional documentation, including audited financials, that together can run into the thousands of dollars, and to make matters worse, submitting the application comes with an obnoxious $5,000.00 non-refundable fee.
A complete list of the requirements are summarized in this document, and has some useful information on the application process.
However, here's the real kicker, the surety bond (which could run as much as a million), is not disclosed up front, and is set by, and at the discretion of, the NYDFS. Meaning they set the amount, later, and before you ever see any kind of license.
This is not an application, this ... is a mouse trap.