Mercatus Center Technology Policy Program Submits Comments to New York DFS on Proposed Virtual Currency Framework

Mercatus Center Technology Policy Program Director Jerry Brito and research fellow Eli Dourado ("Mercatus scholars") submitted comments to the New York Department of Financial Services ("NY DFS") regarding its recently proposed BitLicense regulatory framework for virtual currency firms.

The goal of the framework, as stated by Superintendent Benjamin Lawsky, is "to strike an appropriate balance that helps protect consumers and root out illegal activity - without stifling beneficial innovation." The Mercatus scholars argue that the proposed framework misses its mark.

According to the Mercatus scholars, the proposal fails to accommodate some of the most important attributes of software-based innovation. They explained that NY DFS should take into account the "unique characteristics" of virtual currencies in order to foster innovation within the proposed BitLicense regulatory framework.

Additionally, they argued, the purpose of a BitLicense should be to take the place of a money transmission license for virtual currency businesses. Therefore, the obligations faced by BitLicensees "should not be any more burdensome than those faced by traditional money transmitters," since additional regulatory burdens would put BitLicensees at a relative disadvantage. According to the Mercatus scholars, in several cases, the proposed regulatory framework would be more onerous than traditional money transmitter licensing.

The Mercatus scholars stated that they hope NY DFS publishes a revised draft and solicits further comments to ensure the success of its foundational framework.

See: Mercatus Center Comments; Jerry Brito's Blog Post regarding the Comments (from The Technology Liberation Front Web Site). Related news: NY DFS Releases Proposed Licensing and Regulatory Framework for Virtual Currency Firms (with Brito Comment) (July 18, 2014).