Three Strikes, You’re Out for BitLicense Applicants Under NYDFS’ New Guidelines
New York's regulatory and financial agency has issued a warning to Crypto companies vying for the states Bitlicense. According to the watchdog, companies could see their applications terminated if they fail to adhere to feedback.
This was made public on Wednesday, 24 June, when New York's Department of Financial Services announced that it would be implementing a new ‘three-strike' policy for each application. Implementing such a policy would allow the agency to respond more effectively to applications that do not adhere to requested feedback.
According to the Department of Financial Services:
“If 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 introduction of this ‘three-strike' rule comes as New York celebrates the fifth anniversary since the Bitlicense was introduced. Since its conception, the state has been continually updating its regulatory framework for crypto companies to do business in New York easily. While Bitlicense's structure has been regularly updated and re-evaluated, the state has approved only 25 companies. Even now, only 19 of them have received physical licenses.
One of the most recent applicants under New York's Bitlicense was the derivatives clearinghouse company – ErisX in May.
So what was the true motivation behind making these changes, and implementing this rule? The agency mostly cited that it sought to help improve the existing procedure of applying for the BitLicense. Implementing a three strike policy would allow more responsive applicants to have their applications expedited. Meanwhile, companies that don't adhere to regulatory concerns would have their applications rejected. The note continues,
“DFS believes this policy will benefit the majority of applicants who diligently advance their applications once they are under substantive review, allowing for more effective use of DFS resources.”
While the three strike rule is the most catchy change introduced, regulatory changes include the introduction of a checklist feature. The purpose is to ensure that companies have clear guidelines on what steps need to be addressed or have already been completed.
While these new regulations presume to make the process easier, publications have since argued that it may make the whole process far harder.