NY Bitlicense definitive framework [pt.2]




The BitLicense is setting new precedents with its definition of “Virtual Currency” and “Virtual Currency Business Activity.”

Virtual Currency

The definition of virtual currency in the BitLicense is as follows:

Virtual Currency means any type of digital unit that is used as a medium of exchange or a form of digitally stored value. Virtual Currency shall be broadly construed to include digital units of exchange that:

i) have a centralized repository or administrator;

ii) are decentralized and have no centralized repository or administrator; or

iii) may be created or obtained by computing or manufacturing effort.  (§.200.2 (p))

The BitLicense explicitly excludes from the definition:

i) “digital units” used solely within gaming platforms and that do not have a market outside of the game, nor can be sold for Fiat Currency or Virtual Currency;

ii) points within customer rewards programs;

iii) prepaid cards. (§.200.2 (p)(1))

Virtual Currency Business Activity

The BitLicense defines Virtual Currency Business Activity (VCBA) as any of the following:

i) receiving Virtual Currency for Transmission or Transmitting Virtual Currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of Virtual Currency;

ii) storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;

iii) buying and selling Virtual Currency as a customer business;

iv) performing Exchange Services as a customer business;

v) controlling, administering, or issuing a Virtual Currency

Miners and mining pools are not considered to be VCBA. Storage and custodian services utilizing multi-signature features are also excluded from the BitLicense.