Bitcoin Wallet Provider Receives BitLicense from the State of New York

June 17, 2018 / Richard B. Newman

Despite its stringent laws pertaining to the crypto sector, reports are that cryptocurrency wallet and vault Xapo, Inc. has received a ‘BitLicense’ from the New York Department of Financial Services. DFS has also authorized Paxos Trust Company LLC, f/k/a itBit Trust Company, to offer exchange and custody services for Ether, Litecoin, Stellar Lumens and Bitcoin Cash, emerging cryptocurrencies, on its virtual currency exchange.

The June 14, 2018 press release from DFS touts the advancement of responsible growth in New York’s fintech industry with new virtual currency approvals.

Department of Financial Services Superintendent Maria T. Vullo said that the actions “represent New York’s continued commitment to creating a thriving, global fintech marketplace. Through strong and thoughtful regulatory oversight by DFS, consumers and the virtual currency market alike will continue to benefit.”

Xapo is a digital financial services companying offering Bitcoin products and services. It will be authorized to offer a digital wallet and a vault service, which is intended as a safe and insured method to store Bitcoins.

According to DFS, a comprehensive review of Xapo’s application was conducted, including the company’s anti-money laundering, anti-fraud, capitalization, consumer protection and cybersecurity policies. The new licensee is subject to ongoing supervision by DFS.

DFS issued a virtual currency charter in 2015 to itBit (n/k/a Paxos Trust Company), a subsidiary of Kabompo Holdings Ltd., which operates the itBit exchange, to offer services for buying, selling, sending, receiving, and storing bitcoin.

DFS has authorized Paxos to expand its service offering to include Ether, Litecoin, Stellar Lumens and Bitcoin Cash.

The Ethereum network is a cryptocurrency and blockchain platform. Ether is the digital cryptography-based asset of the Ethereum network, much like how bitcoin is the digital cryptography-based asset of the Bitcoin network.

Litecoin was developed as a modification of the Bitcoin protocol. It is a well-known virtual currency that is nearly identical to Bitcoin and was one of the first alternative virtual currencies to bitcoin.

Lumens is the native virtual currency asset of the Stellar network. Bitcoin Cash is the digital cryptography-based asset of the BCH network.

Reports are that DFS has now approved eight firms for virtual currency charters or licenses, while denying those applications that did not meet DFS’s standards. DFS has granted licenses to Genesis Global Trading Inc., bitFlyer USA, Coinbase Inc., XRP II and Circle Internet Financial, and charters to Gemini Trust Company and Paxos.

Contact an FTC defense lawyer to discuss the framework of rules and regulations governing the use of cryptocurrency.

Richard B. Newman is a NYC DCA defense lawyer at Hinch Newman LLP.  Email him at rnewman@hinchnewman.com and follow him on Twitter. 

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Richard B. Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,

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