When can you skip the BitLicense?
Before diving in, make sure you actually need a license (it’s not free). You’re exempt if you’re:
A consumer who uses virtual currency solely for investment purposes.
A merchant or consumer who uses virtual currency solely for the purchase or sale of goods or services.
A charitable organization that solely accepts donations in virtual currency.
An individual or business that solely mines virtual currency and sells mined coins in private, non-commercial transactions.
An individual or company that solely develops and disseminates software (as a purely technical service) for the virtual currency space.
An individual or company that provides advice on buying or selling virtual currency.
A business chartered under New York Banking Law that has received the Superintendent’s approval to engage in virtual currency business activity without a BitLicense.
If you fall into one of the above categories, stop here. Otherwise, read on.
Who needs a BitLicense?
You need a BitLicense if you are conducting one of the following five activities “involving New York or New Yorkers” (emphasis added):
receiving Virtual Currency for transmission or transmitting Virtual Currency;
storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;
buying and selling Virtual Currency as a customer business;
performing exchange services as a customer business; or
controlling, administering, or issuing a Virtual Currency.
To simplify, if you are a business, individual, or charitable organization that sends, receives, stores, holds, buys, sells, exchanges, controls, administers, OR issues virtual currency on behalf of others (with even one of those “others” involving a New Yorker or New York), you’ll need a BitLicense. Yes, your business can be located outside New York and still need one. Additionally, if you engage in the transmission of fiat currency as part of your business, you will also need a Money Transmission License.
How much does a BitLicense Cost?
You’ll need to pay an application fee of $5,000 to the state of New York and $15 for each control person to cover credit reports. This will be paid online during your filling submission.
How do I get a BitLicense?
The process is straightforward (albeit time-consuming). BitLicense applications are submitted electronically through the Nationwide Multistate Licensing System (NMLS), which is essentially an online form. You’ll also need to provide documents (some of which may need to be sent in hard copy). Collecting all the information and documents will be the most cumbersome step.
Ready to start?
Step 1: Complete a Company Account Request Form, during which you will identify a Primary Account Administrator and a Secondary Account Administrator.
The good news is that this form needs to be submitted only once per company, regardless of the number of states where you are obtaining a license. In short, go here and click on “Company Account Request Form” under Step 2. If it says the site is down after you click (it happened to us, twice, over two days), take a deep breath, go for a walk, and try again later.
Step 2: While you wait for your login credentials (which can take up to 3 days), download the “BitLicense Application Checklist.”
Yes, it is 19 pages. Do not get discouraged, and start gathering the requested information and documents.
Take it one checkbox at a time and take regular sanity breaks. Your application must contain all items on the checklist. No exceptions.
The review process will not begin until the application is “informationally complete.” Get the checklist here
Step 3: Once you, as the Primary Account Administrator, get the login information, you will be able to access the system.
Now, note down your NMLS Identification Number and keep it safe. To the system, you are this number.
You’ll need it for any correspondence throughout the process, and all hard-copy documents you submit must have this number on them.
Step 4: Check the email associated with the NMLS account regularly and respond to any requests for additional information and supporting documents. Depending on the person reviewing your file, these can go beyond those found on the BitLicense Application Checklist.
Check your junk email/spam folder, as this is where all important emails end up.
Hopefully, we’ve given you enough to start your journey. The New York State Department of Financial Services website provides a more detailed (if less to the point) description of the process and links to all the regulations and guidelines associated with virtual currency business activity.
Disclaimer: Information is current as of the publication date. This material is for informational purposes only. It is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their advisors before making these types of decisions. Ospree has no responsibility or liability for any decision made or other acts or omissions concerning the Recipient’s use of this material.
