BitLicense Proposal Would Threaten Financial Privacy, Tech Coalition Tells NY Regulators

WASHINGTON D.C. — Last month, the New York Department of Financial Services (NYDFS) proposed a “BitLicense” to regulate virtual currencies, such as Bitcoin. Today, Coin Center, the Center for Democracy and Technology (CDT), and TechFreedom filed a joint comment on the proposal, urging the NYDFS to avoid creating new privacy risks for users and businesses.

“Virtual currency technology has the potential to unleash a new class of innovative and beneficial financial services,” said Harley Geiger, Advocacy Director and Senior Counsel at CDT, “but New York’s BitLicense proposal undermines that potential. As written, New York’s proposed BitLicense would require a wide variety of businesses to closely monitor everyday users of virtual currency in order to aid state surveillance, creating significant new risks for both users and businesses. We call on the state of New York to revise its proposed virtual currency regulations to better balance the interests of law enforcement with privacy, data security, and innovation.”

“Superintendent Lawsky has acknowledged that Bitcoin is a promising innovation with the potential to enhance consumer financial privacy. Our comment lays out specific changes to the BitLicense proposal that are necessary to preserve that potential,” said Coin Center Director of Research Peter Van Valkenburgh. “If it takes the right approach, the Department can foster innovation in an industry that as of late has been languishing under the weight of outdated tools, porous infrastructure, and aggressive new cyber-threats.”

“Massive data breaches over the past year have highlighted the vulnerability of the traditional credit card payment system,” said Berin Szoka, President of TechFreedom. “But instead of new regulation of technology, the best answer is often better technology. Yet by requiring individuals to comply with onerous new financial regulations for virtual currency, New York risks stifling adoption of far less vulnerable payment systems. And by potentially requiring virtual currencies to reengineer their systems, the proposed BitLicense risks making virtual currencies less secure and private. The goal, at all levels of government, should be to give consumers more choices for more secure and private financial technologies.”

Geiger is available for comments and questions at [email protected], and Szoka is available for comments and questions at [email protected].

See more of our work on digital currency, including:

• “NY’s Proposed BitRegs a Threat to Privacy and Innovation“, Harley Geiger, Center for Democracy & Technology, Sep. 5, 2014.
• “Comments to the New York Department of Financial Services on the Proposed Virtual Currency Regulatory Framework,” Jerry Brito & Eli Dourado, Aug. 14, 2014.