New York’s Department of Financial Services issued its 18th BitLicense yesterday to the cryptocurrency brokerage Tagomi. The department issued most of those licenses within the past year.
The application was officially approved for Tagomi Trading LLC, a subsidiary of Tagomi Holdings Inc. Tagomi started trading cryptocurrency on behalf of clients that include hedge funds and wealthy individuals back in December. Its cofounders include Greg Tusar, the former head of digital trading at Goldman Sachs Group, Tagomi CEO Jennifer Campbell, and Marc Bhargava, the company’s president.
New York’s DFS has been issuing BitLicenses for companies dealing with cryptocurrency in the state since 2015, and Tagomi isn’t the first with ties to Goldman Sachs. The department awarded its first BitLicense to Circle, a crypto finance company that operates the Poloniex exchange and is backed by Goldman Sachs Group, in September 2015. That year, companies in New York dealing with cryptocurrency had until mid-August to apply for a BitLicense, or else they could no longer legally operate in the state. In New York Business Journal on Aug. 12, 2015 journalist Michael del Castillo wrote that bitcoin startups in the state had been “clearing out” since the deadline.
So what exactly is a BitLicense, and who needs to have one?
The NYDFS released a proposal for the BitLicense in July 2014 after almost a year’s worth of research and public hearings, including a Reddit AMA hosted by then financial services superintendent Benjamin Lawsky. According to the NYDFS, the AMA received more than 1,200 comments, which the department says it took into account when creating the license’s regulatory framework. BitLicense requirements for crypto companies became law in June 2015. Some CEOs less than thrilled about it.
Today, the BitLicense (also known as a Virtual Currency Business Activity License) has three, central aims—to establish regulations that prevent money laundering, protect consumers, and lay out rules related to cybersecurity. It applies to companies that transmit, hold, buy, sell, administer, or issue cryptocurrencies as a customer business or operate crypto exchanges (which means a business owner doesn’t need a BitLicense to accept cryptocurrency as payment).
As of October last year, the NYDFS started using the Nationwide Multistate Licensing System and Registry to manage its BitLicenses. The NMLS is a digital system that processes state licenses from 62 different states and territories. Companies can now submit their BitLicense applications to NMLS directly, and those that already have BitLicenses can choose to move theirs over to the national registry by submitting a form. Consumers can use the NMLS to check out whether a company’s allowed to operate in their state (for all the crypto narcs in New York looking to rat out non-compliant exchanges).
So far, crypto companies including Gemini, Ripple, Coinbase, Square, BitPay, Coinsource, and Robinhood have been awarded BitLicenses (in that order), among other, lesser known companies. But BitLicenses are no breeze to acquire. Many of these companies had to wait a while between the time they applied for their BitLicenses and the time they were granted them. In May 2018, Fortune reported that Genesis Global Trading (the fifth BitLicense grantee) had to wait close to three years for approval, while Japan-based BitFlyer had to wait for more than a year for its New York license—when it had already been licensed in its highly regulated home country.
At the time, Jeremie Beaudry, head of compliance at Atlanta-based BitPay (then still waiting for its BitLicense application to go through), called New York’s process “by far the most arduous.” Both Erik Voorhees, CEO of ShapeShift, and Jesse Powell, head of the crypto exchange Kraken, pulled their businesses out of New York to escape that very process. Voorhees has made it clear that he’s not a fan of the legislation (see above tweet), as has Powell.
However, since that Fortune article came out, 13 additional companies have received BitLicenses. Maybe New York is getting a bit more bullish.