New York Virtual Currency License
- Tetra Consultants assist international clients with securing a New York Virtual Currency License. New York is an excellent jurisdiction to form a cryptocurrency business and receive a cryptocurrency license. A BitLicense received by licensed crypto exchanges in New York allows the holder to run a bitcoin exchange and administer hosted cryptocurrency wallets, among other things. Because of the simplicity of acquiring a cryptocurrency license and the freedom it provides within the United States and overseas, New York is an ideal location for blockchain-related companies.
- Further, the Gross Domestic Product of the State of New York makes it one of the world’s fifteenth-largest economies. The well-recognized financial capital of the world, New York houses a majority of the world’s asset managers. This further extends to the bitcoin and cryptocurrency space, where a large majority of notable cryptocurrency-based hedge funds are managed from.
- Among the fifty United States, New York is the first to adopt cryptocurrency-specific license legislation. New York’s BitLicense – the first of its kind USA crypto license, seeks to create a regulatory framework for cryptocurrency-related activities. As the U.S. as a whole continues to debate the legal status of cryptocurrency, the New York crypto license provides operators with legal certainty and acknowledged legitimacy.
Background of New York Virtual Currency License
- The BitLicense, a historic cryptocurrency law, is a terminology for a virtual currency business license regulated by the New York State Department of Financial Services (NYSDFS) under regulations established for businesses or individuals engaging in business activity concerning virtual currency in New York.
- The very first BitLicense was granted in 2015 to mixed reactions, as many people regarded the regulation to be rather onerous, and they also thought that bitcoin businesses were subjected to more stringent regulations than traditional financial institutions. BitLicense is still a cause of dispute among many in the blockchain community. Some critics believe that New York has put budding investment managers between a difficult situation and a hard place, discouraging new enterprises from establishing themselves in the state unless they have huge money and plenty of tolerance when filing for New York crypto license applications.
- After significant pushback and complaints, New York regulators implemented a more “liberal” framework on June 25, 2020, to allow prospective licensees to collaborate with an existing BitLicense holder to obtain dedicated guidance relating to the structure, capital, systems, and personnel requirements. The goal of these adjustments was to assist in overcoming “real or perceived difficulties” in getting the BitLicense by using the experience of an existing license holder. There is still no assurance, however, that a current license holder will have the time or inclination to guide an applicant through the demanding procedure. Given the difficulty of obtaining a BitLicense, New York has seen bitcoin start-ups leave the state and relocate to other jurisdictions that are viewed as friendlier and more conscious of the fledgling manager’s limitations to huge quantities of operating capital and internal labor at launch.
- Tetra Consultants’ team of licensing experts has years of experience assisting international clients with the process of setting up a cryptocurrency business and acquiring a respective USA crypto license. At Tetra Consultants we understand the rigorous application inspecting procedure and requirements governing a virtual currency license in New York. Hence, we always recommend enlisting the help of a professional before you advance to apply for a New York crypto license.
Who is the regulatory authority regulating a virtual currency business in New York?
- New York State Department of Financial Services (NYSDFS) is the regulatory body authorizing and managing the licensing and business operations of entities conducting virtual currency business in New York. NYDFS now allows organizations applying for, upgrading, or maintaining BitLicenses to submit most of the documentation online, via the Nationwide Multistate Licensing System and Registry, as part of a modernization drive (NMLS). If a corporation applies for a NY BitLicense and a Money Transmitter License, it is unnecessary to give repetitive information.
Who needs a New York Virtual Currency license?
- A New York Bitlicense license is typically required for companies engaging in any “Virtual Currency Business Activity.” The regulation concerning the New York crypto license defines virtual currency business activity as conducting any one of the following types of activities involving New York or a New York Resident:
- Receiving virtual currency for transmission or transmitting virtual currency unless the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of 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, managing, or issuing a virtual currency.
- While the terminology “virtual currency” is interpreted generically, implies “any sort of digital unit that is utilized as a medium of exchange or a form of digitally stored value,” whether centralized or decentralized, and is synonymous with what is often referred to as “cryptocurrency” or “digital currency”. However, merely developing and distributing software does not necessitate a BitLicense.
- To conduct virtual currency business in New York State, companies can apply for a BitLicense or a charter under the New York Banking Law (such as a New York State limited purpose trust company or a New York State bank) with authorization to conduct virtual currency business. While these authorizations are equivalent, a New York State limited purpose trust corporation charter may offer some extra advantages. A limited-purpose trust business, for example, can exercise fiduciary rights, but a BitLicensee cannot. Furthermore, a limited-purpose trust company can conduct money transmission in New York without the need for a separate New York money transmitter license.
What are the activities allowed under a New York Virtual Currency License?
This license authorizes the following activities:
- Virtual currency exchanging and trading services
- Electronic money transmitting
- Issuing prepaid access/stored value
- Selling prepaid access/stored value
What is the procedure for obtaining a New York Virtual Currency License?
Step 1: Incorporation of a domestic entity in New York or the respective state of choice
- To legally start a virtual currency business in New York, you need to have a legally registered entity either domestically or in any other state of the US depending on your business needs and goals.
- Tetra Consultants will assist you in registering a domestic company by providing a local company address, a local nominee director (if required), and a local company secretary. You will be required to provide a list of required KYC documents such as the names of directors, the company’s resolution, and identification proof.
- Based on the documents provided, Tetra Consultants will draft and notarize the Memorandum and Articles of Association, business plan, and other incorporation documents. After preparing the relevant documents, Tetra Consultants will register your company with the NYS Department of State (NYSDOS). Typically, this process should take approximately 2 weeks.
Step 2: Opening a corporate bank account suitable for cryptocurrency exchange operations
- From the very beginning of your business operation, it is not only a good idea that your business’s finances are segregated from your individual accounts, but it is also necessary to demonstrate that you are keeping your business’s assets distinct from your personal assets. Hence, you need to open a bank account for your business to implement this strategy. It will additionally be beneficial for tax registration and certainly obtaining an EIN for your business.
- Upon registering the company, Tetra Consultants will proceed to a crypto-friendly corporate bank account opening process with a reputable local or international bank. You can expect your corporate bank account to be ready in 4 weeks.
Step 3: Drafting of requisites policies and documents for the New York Virtual Currency License application
- Tetra Consultants will assist you in preparing the documents required for the application of BitLicense. Documents required include the Company Form (MU1), Individual Form (MU2), business plan, business volume estimate, information about the ownership and control of the money services business, and a list of agents that will be authorized to conduct virtual currency business, other respective financial statements, and financial projection documents as required by DFS.
- Afterward, our team of consultants will assist you in preparing a comprehensive AML/CFT compliance program and policies for the entity. The policies and compliance program will be drafted in writing for your further review and in accordance with the Act and associated regulations imposed by DFS and respective federal authorities.
- Developing and applying written compliance policies is fundamental to upkeeping the license. Our team will draft and further review the adopted compliance policy and advise you on how you can more effectively update and improve the compliance program. We will also assist you with the drafting of an effectiveness review of the compliance program. Tetra Consultants will also advise you on how you can update the required documentation or improve the existing compliance program. This is to ensure that your business remains capable of addressing all money laundering or financial crime threats.
- As all companies require a chief compliance officer, Tetra Consultants will also assist in recruiting a fit and proper chief compliance officer. The chief compliance officer will also be equipped with the necessary knowledge about the AML/CFT, BSA e-filing, and its associated regulations to ensure that your business remains compliant.
Step 4: Applying for a requisite surety bond
- Each licensee shall maintain a surety bond or trust account for the benefit of its customers in such form and usually at such amount as is acceptable to the Superintendent for the protection of the licensee’s customers.
- Unless otherwise specified by NY-DFS, the current NY-DFS requirement for the surety bond or trust account is US$500,000 for each Virtual Currency Business Activity License.
- Tetra Consultants team will assist with securing such a surety bond and prepare the legal documentation in accordance with the license requirements.
Step 5: Submission of application for New York BitLicense
- With everything in place, the Tetra Consultants team will proceed with the submission of the New York Virtual Currency License application to the New York State Department of Financial Services (NYSDFS) through the web-based system called Nationwide Multistate Licensing System and Registry (NMLS).
- Tetra Consultants’ team of license experts will assist with the representation before licensing regulatory authorities, banks, and liquidity providers and negotiate with the regulatory bodies throughout the process of acquiring BitLicense.
Who are exempted from applying for a New York Virtual Currency License?
Under New York Bitcoin Law, the following Persons are exempt from the BitLicense requirements otherwise applicable:
- Persons that are chartered under the New York Banking Law and are approved by the superintendent to engage in virtual currency business activity; and
- Merchants and consumers that utilize virtual currency solely for the purchase or sale of goods or services or for investment purposes.
What are the minimum regulatory requirements for obtaining a New York Virtual Currency License?
- There are several documents an applicant is required to provide during the submission process of license application. A specific list of documents and information can be suggested only after the complete evaluation of the client’s business plan and the regulations set forth at the time by the Superintendent of Financial Services.
- Pay an application fee of $5,000
- Submit the application form
- A copy of your business plan
- Certificate of your company’s good standing in New York
- All procedures and policies for agency contracts
- Samples of all documents you will use for customer transactions
- A step-by-step description of your intended flow of funds
- All formation documents for the company
- Ownership information about the company
- A management flow chart
- Financial statements of two years of the applicant’s most recent audited financial statements
- Personal financial statements for company control persons
- Background checks, fingerprints, and credit reports for company control persons
- Information about your Chief Compliance Officer (minimum 3 years experience)
- List other trade names, resident/registered agent, primary and non-primary contact employees, chief compliance officer
- Submit: disclosure questions, control person attestation, credit report, AML/BSA policy, business plan, certificate of authority/Good Standing Certificate, Company staffing and Internal Policies, document samples, Flow of Funds Structure, formation documents, management chart, Organizational Chart/Description, credit report explanations, personal financial statements, authority to release information
- Policies and procedures must address compliance, anti-fraud, cyber security, privacy, and information security, business continuity and disaster recovery, complaints, and complaint resolution.
- Licensees must obtain a surety bond or trust account in an amount that is acceptable to the Superintendent for the protection of the licensee’s customers. The applicant may propose a bond amount and state why they believe the amount is sufficient to protect their customers.
- One source of contention among managers and executives is the superintendent’s decision on the minimum capital requirement, as no preset specification on what this minimal amount is currently set out. The superintendent evaluates the licensee’s financial integrity. Several factors are considered in determining financial integrity, including the licensee’s total assets and total liabilities, the anticipated volume of virtual currency activity, the amount of leverage used, liquidity positions, and the types of products or services that will be offered, among many others. Finally, the superintendent will determine if the aggregate of the information gathered is sufficient to meet the capital requirement.
- Accordingly, based on an evaluation of the specific risks applicable to each licensee, each licensee shall keep at all times such capital in an amount and form as the superintendent considers sufficient to safeguard the financial integrity of the licensee and its continuous activities. The superintendent may consider a range of parameters in establishing the minimum amount of capital that a licensee must maintain, including but not limited to:
- The licensee’s total asset composition, including the position, size, liquidity, risk exposure, and price volatility of each type of asset;
- The licensee’s total liability composition, including the size and repayment timing of each type of liability;
- The licensee’s actual and expected volume of virtual currency business activity
- If the licensee has already been licensed or regulated by the superintendent under the Financial Services Law, Banking Law, or Insurance Law, or otherwise subject to such laws as a provider of a financial product or service, and whether the licensee is in good standing in such capacity;
- The amount of leverage used by the licensee
- The licensee’s liquidity position;
- The financial protection provided to its customers through its trust accounts or any kind of bond.
- The types of entities to be serviced by the licensee;
- The types of products or services to be offered by the licensee.
- Each licensee shall keep the capital needed by this section in cash, virtual currency, or high-quality, highly liquid, investment-grade assets in the proportions acceptable to the superintendent.
How much does it cost to obtain a New York Virtual Currency License?
- Currently, the standard application fee for a New York Virtual Currency License (BitLicense) is set at $5,000. However, the overall fees and cost may differ depending on the type of services acquired for license applications, including preparing information relating to the financial condition of the applicant as well as the responsibility, financial, and business experience, and character and general fitness of the management and board of the applicant.
- The total engagement fee depends on the services you need from Tetra Consultants. We provide you with multiple services ranging from assisting you through the incorporation process to obtaining the New York Virtual Currency License. This total fee that will be charged will be inclusive of the company registration fee, license fee, and any additional cost that may arise.
- We will discuss with you the total engagement fee charged in detail before we begin the registration and license application process so that you have a better understanding of what you are paying for.
How much time does it take to obtain a New York Virtual Currency License?
- New York DFS is required to process a BitLicense application within 90 days after receipt, this period may be prolonged at DFS’ discretion and may include requests for further information. At its discretion, DFS may also award conditional BitLicenses.
- Prior to the start of the engagement, Tetra Consultants will send you a project plan with the timelines stipulated for company registration, preparation of documents as well as license application. This is to ensure that all parties are clear on the upcoming project.
Find out more!
- Tetra Consultants is a one-stop corporate service provider with a global network of partners and a diversified portfolio of businesses. We provide extensive assistance to our international clients with securing different forms of USA crypto license in the state of their choice. Our service package for securing such licenses includes the incorporation of the entity in the proposed state, preparation of the license application, creating a comprehensive timeline for the full setup and operation of your entity, drafting the needed documents, and gathering relevant and acceptable data.
- In addition, Tetra Consultants can also assist with attaining other offshore financial licenses depending on your long-term business goals.
Contact us to find out more about how to secure a New York Virtual Currency License to conduct cryptocurrency business. Our team of experts will revert within the next 24 hours.
What is a virtual currency license?
- A BitLicense is a prevalent term for a virtual currency business license given by the New York State Department of Financial Services (NYSDFS) under company-specific restrictions. The laws apply only to acts involving the state of New York or a resident of New York.
How do I get a BitLicense in New York?
- A BitLicense is a mandatory requirement to open a virtual currency business in New York. Before applying for the license, the applicant needs to accumulate the required minimum paid-up capital first and then incorporate an entity conforming to the local laws of the jurisdiction.
What are the minimum formation requirements for an Australian limited liability company?
- Setting up an Australian limited liability company has minimal requirements which include a shareholder of any nationality, a local resident director, a local resident public officer, a company secretary, and a local Australian registered address.
- Tetra Consultants is proficient in providing assistance to our international clients in obtaining cryptocurrency licenses. We make sure that our clients get the approval and cryptocurrency licenses in a shorter period of time while taking care of all the regulatory requirements and preparation of documents.
How much is a BitLicense?
- Currently, the standard application fee for a New York Virtual Currency License (BitLicense) is set at $5,000. However, the overall fees and cost may differ depending on the type of services acquired for license application.
- Tetra Consultants will discuss with you the total engagement fee charged in detail before we begin the registration and license application process so that you have a better understanding of what you are paying for.
Can a New York virtual currency license be acquired online?
- Yes, Tetra Consultants will make sure to provide you with such services which require minimal or zero travel possibilities to the proposed jurisdiction for attaining a BitLicense.
Who needs a BitLicense?
- If a company engages in Virtual Currency Business Activity involving New York State or any individual who resides, is located, has a place of business, or is conducting business in New York State, it must acquire a BitLicense.