New York Regulator Adds 3-Strike Rule for BitLicense Applicants

The regulator hopes the new three-strike rule will encourage BitLicense applicants to ensure they've taken its feedback on board.

AccessTimeIconJun 26, 2020 at 8:46 a.m. UTC
Updated Dec 11, 2022 at 2:12 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

New York's financial watchdog has warned crypto companies that their BitLicense applications could be thrown out without warning if its feedback is not heeded.

In an updatehttps://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/gn/notice_vc_busact_lic_app_procedure Wednesday, New York's Department of Financial Services (DFS) said a new three-strikes rule would authorize it to deny any applications that didn't address or consider any deficiencies highlighted by the regulator.

The warning reads, "[I]f all deficiencies involving a particular application requirement or set of requirements have not been fully and effectively addressed by the end of the response period for the third deficiency letter ... the DFS may, without further notice, deny the application."

The new rule coincides with the fifth anniversary of the BitLicense, which saw the regulator update its framework for businesses, like exchanges and wallets providers, to operate legally in New York State. To date, only 25 companies have been approved, with 19 receiving actual licenses and six receiving limited purpose trust charters.

The most recent successful applicant was derivatives clearinghouse ErisX, which received its BitLicense at the start of May.

Indeed, part of the motivation behind this week's rule change is to help streamline the application procedure. The regulator argues the three-strike rule will encourage applicants to make sure they have fully addressed all the concerns laid out in the deficiency letters before resubmitting.

"DFS believes this policy will benefit the majority of applicants that diligently advance their applications once they are under substantive review, by allowing for a more effective use of DFS resources," the note reads.

Another aspect of this week's rule change is a new checklist feature companies can use to ensure they have completed all steps required, such as providing all the right documentation before they send off their application to the regulator.

So rather than getting easier, the DFS has told applicants they need to step up their game even further.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.