Today we joined with over sixty thought leaders, investors and companies calling on the New York Department of Financial Services to create a safe harbor under its proposed BitLicense rule.
We’re excited about the recent announcements for blockchain businesses out of New York. They demonstrate an expanding recognition of the enormous potential of blockchain technology. However, as the leading technology company developing open source protocols for virtual currency and blockchain businesses, we believe it’s misguided to expect early stage companies to adhere to licensing requirements that are similar to those of large financial institutions.
The untapped potential of blockchain technology is almost entirely being pioneered by startups and early stage players. These companies are several years ahead of Wall Street. Imposing significant costs and bureaucracy on early adopters will stifle innovation at a time when it’s needed most, if the not-too-distant history of the financial markets is to be avoided. As we’ve seen with recent proposals in other regions, like the UK and Hong Kong, it’s possible to conceive policies that go in exactly the opposite direction of BitLicense.
The letter proposes the addition of a safe harbor provision that would apply to: 1) Startups in their first two years (startup onramp); 2) Micropayment platforms; 3) Security intermediaries (e.g., multisig providers); and 4) Creators of new protocols and currencies. To qualify for the safe harbor, companies would agree to post consumer protection notices, follow security best practices, and, comply with some existing regulations if applicable.
This is Blockstream’s first foray into policy matters since announcing the company last November. We plan to take a more active role in the months and years to come, but it’s worth noting we share many of the concerns about BitLicense raised by other groups like EFF, Coin Center, CDT and WordPress. We see the new California State Assembly bill (AB-1326) and the US’ early efforts to regulate this nascent technology as mostly ill-advised, ostensibly driven by miscomprehension of the underlying technology, and unfortunately, as opening the door for bitcoin businesses to go to parts of the world with fewer restrictions.
The proposed safe harbor outlined in our letter is well-considered and suggests reasonable requirements that will provide standardization, transparency, and support for existing compliance obligations. Both Fred Wilson (Union Square Ventures) and Coin Center make strong cases for adding startup onramps in New York. We seen how safe harbors in Internet policy over the past two decades have fostered open innovation and commerce. We hope the NYDFS adds this provision to its final rules and extends safe harbors to the next wave of startups critical to the future of global finance.