Today the New York State Department of Financial Services’ BitLicense regulation was published in the New York State Register. Although the Superintendent of Financial Services released the final BitLicense regulation on June 3, 2015, it was not effective until publication.

The Department of Financial Services has described the BitLicense as “the first comprehensive framework for regulating digital currency firms” and touted its protections for consumers and anti-money laundering procedures. Many participants in the virtual currency industry have expressed strong objections to the requirements set forth in the BitLicense regulation, and some have even suggested that it will drive all virtual currency businesses out of New York.

While speculation about the consequences of this regulation has been rampant, the actual impact will soon be apparent. Section 200.21 of the regulation states that anyone engaged in a “Virtual Currency Business Activity” has 45 days from the effective date to apply for a BitLicense. In addition, “any Person engaged in Virtual Currency Business Activity that fails to submit an application for a license within 45 days of the effective date of this regulation shall be deemed to be conducting unlicensed Virtual Currency Business Activity.” Any business that is conducting a “Virtual Currency Business Activity” has until August 8 to apply for a license or be deemed to have violated the BitLicense regulation.

Unfortunately, it is unclear to many what activities fall within the definition of “Virtual Currency Business Activity.” Section 200.2 (q) states that a Virtual Currency Business Activity means the conduct of any one of the following types of activities involving New York or a New York Resident:

1. 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;
2. storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;
3. buying and selling Virtual Currency as a customer business;
4. performing Exchange Services as a customer business; or
5. controlling, administering, or issuing a Virtual Currency.

For many, this definition raises more questions than it answers, such as when a transaction is “non-financial,” when an amount of virtual currency is “nominal,” what constitutes maintaining custody of a virtual currency, etc. Many of the requirements of the BitLicense regulation are similarly difficult to understand. These ambiguities, and how they are addressed by the DFS and by virtual currency businesses, will be the subject of later blog posts.