In 2015, the New York State Department of Financial Services issued a guideline which obliged all companies that work with cryptocurrencies to obtain special permits (licenses). Such licenses should be obtained if the activity of a legal entity is related to:

  1. transfer of cryptocurrency;
  2. safe storage of funds of third parties in cryptocurrency;
  3. purchase and sale of cryptocurrency on a regular basis, including the exchange of cryptocurrency (primarily the activity of cryptocurrency exchanges falls into this category);
  4. control, issue of cryptocurrency (ICO also falls into this category. Note that even in case the company is not registered in the state of New York or the USA, it still needs to obtain the above license in order to render its services to the residents of the state).

For miners and individuals carrying out work for technical support of the infrastructure the BitLicense is not required.

It should be noted that in addition to the BitLicense itself, there is a requirement to keep funds in reserve to the extent that the funds could be transferred to the company, which is the holder by clients (the reserve must be in the same virtual currency, in which clients invested).

In addition, companies carrying out operations with cryptocurrencies should work with real names and addresses of clients (i.e., conduct due diligence and KYC / AML verification of clients) and warn authenticated customers about possible risks of working with cryptocurrency.

To get the Bit License, you must pay a fee of $ 5,000 and provide to the regulator, the New York Department of Financial Services (NYDFS), the following documents :

  1. copies of passports of UBO (ultimate beneficial owner), director, shareholders, top managers;
  2. CV of the abovementioned persons. Please note that if other employees have access to the users' funds, it is necessary to prepare and send CV of these persons as well. It is necessary to describe in CV in detail working experience of the subjects, their education, practical courses, professional skills, etc.;
  3. Documents confirming the absence of a criminal record for economic crimes of the abovementioned persons;
  4. Fingerprints and photographs (3x4 or other similar format) of all the aforementioned persons;
  5. Set of statutory documents of the applicant legal entity, description of the legal structure of companies (for example, whether there are subsidiaries / parent companies; as well as an organizational description, for instance, if a company has several departments, this information should be reflected);
  6. Detailed description of your company's activities. In particular, you will need information regarding the history of your company, current work and expected results. If a company already obtained similar licenses anywhere (for example, in Estonia, Japan, Georgia or the USA), then it is information about these permits should be provided);
  7. Rough business plan, which contains as much information as possible about the intended functionality of the platform, the jurisdictions, in which the company plans to provide its services. Moreover, if the company already has any agreements concluded with service providers (for example, with programmers, who develop software for the exchange, banks / payment systems), then these documents should be provided;
  8. Various policies and other documents, which directly regulate the provision of services (this set includes the Terms [terms of service], Privacy Policy [confidentiality policy] , AML Policy [anti-money laundering policy] and others;
  9. It is also necessary to prepare and submit audited financial statements for the last year or several years.

Documents to obtain a BitLicense must be submitted in two versions (in paper and electronic). The paper version is sent directly to the office of the regulator.

You should as well pay attention to the fact that this list is open, accordingly, it may be necessary to provide additional information in order to receive a BitLicense in the state of New York.

The term for obtaining a license takes about 4-5 months (much depends on the timely response of the regulator, which can both speed up and delay this process).

© Alexander Shushin, Law & Trust International Lawyer, 2018