Last night, New York Department of Financial Services Superintendent Ben Lawksy gave a speech at the Benjamin N Cardozo School of Law in which he reportedly backed down from the threat of forcing software developers who innovate around Bitcoin to obtain licenses. According to Coindesk, Lawksy said:
"To clarify, we do not intend to regulate software or software development. For example, a software developer who creates and provides wallet software to customers for their own use will not need a license. Those who are innovating and developing the latest platforms for digital currencies will not need a license."
From the Wall Street Journal:
Software developers, bitcoin miners, and individuals (unless they also offer financial services) doing business in New York state won’t have to apply for a BitLicense, he said, according to the prepared remarks, but traditional banks looking to get into digital currencies will. The proposal was meant as a starting point, not an ending point, he said, but it was also influenced by the collapse of the Mt. Gox exchange.
First of all, this is good news. It’s clear that the NY DFS is starting to hear from entrepreneurs and developers who are concerned that the proposed regulation would be disastrous for both civil liberties and innovation.
But as with any regulation, the devil is in the details. While NY DFS may make promises in press releases and public statements, the real measure of its commitment to innovation and privacy is in the actual text of the regulatory framework. As currently written, the proposed regulations have vague, confusing provisions that could easily be interpreted as affecting developers and other entrepreneurs beyond money services. We won’t know for sure if the next draft is better until we can see the text.
Second, while Superintendent Lawsky is making promises about narrowing the category of people who need to get a BitLicense, we have yet to hear that he’s addressing other privacy and free speech concerns with the proposed framework. These include invasive processes for applying for a BitLicense as well as a mandate that licensees maintain identity records for all transactions for 10 years.
So while we are heartened to see the superintendent is receptive to innovation concerns, we won’t be convinced that there are adequate safeguards for users, developers and merchants until we see those safeguards in writing. For now, we’re urging people who care about civil liberties to speak out against the BitLicense and demand that Superintendent Lawsky uphold digital rights.