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Two bitcoin exchanges bid farewell to Big Apple as the 45-days period set to apply for BitLicense ended on 8 August. Both Kraken and Bitfinex will discontinue their services to New York residents.

In a blog post, Kraken expressed their disappointment about the state regulations.

“Regrettably, the abominable BitLicense has awakened.  It is a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.  It’s at least a 40-man, bro.”

The bitcoin company cites nine major disadvantages attributed to BitLicense. According to Kraken, it guarantees neither support of New York banks nor enforcement against unlicensed competitors. It reduces consumer protection and lays unjustifiable burden and restrictions on global operations. It means unjustifiable bifurcation of the service for New York alone as well as unjustifiable expense for the opportunity to compete on a small market. The law provides no exemption from traditional money transmission licensing and no onramp for small businesses. Finally, it poses a dubious value to the consumer, the company believes.

The only useful feature of BitLicense is protection against New York Law Enforcement itself though it is not a sufficient reason to continue operating in the state:

“While we’re sure that the protection from New York law enforcement is valuable, it comes at a price that exceeds the market opportunity of servicing New York residents.  Therefore, we have no option but to withdraw our service from the state.”  

Kraken advises their clients from New York “to escape across the border before the consumer protective walls are erected around the state line”.

“If the BitLicense becomes significantly nerfed at some point in the future, we may attempt a rescue.  Until then, you’re on your own.  Good luck.”

The Bitfinex announcement sounds more reserved: 

“Due to financial regulation changes in the State of New York, certain Bitfinex services are no longer available for New York Residents.”

The bitcoin exchange acknowledges that account settings for these customers will be modified on 10 August. New York residents should withdraw all cryptocurrency balances by 4:00 pm EDT on 15 August. After that date their funds will be automatically converted to USD at market rates. They will no longer have access to exchange service, margin trading and swaps market. 

According to Barry Silbert, BitLicense has created a deep moat around the more mature, well capitalised bitcoin exchanges. While small companies opted for leaving New York, major exchanges backed by venture capital such as itBit, Gemini and Bitstamp have applied for the license.

 

Nadya Krasnushkina