Greg Simon President of the Bitcoin Association on BitLicense

The final BitLicence framework for regulating digital currency firms was announced on 3rd June 2015, during Ben Lawskys’ final speech as Superintendent of the New York Department of Financial Services. Development of the controversial licence gave Lawsky an insight into digital currency technology, and appears to have affected his view on the financial system.

“In a world where information travels around the globe in a matter of milliseconds it can often take days to transfer that money to a friend’s bank account. In an age of smart phones and on demand technology we still have a disco era payment system.”
— – Ben Lawsky, at the BITS Emerging Payments Forum

During his speech Lawsky went on to say that payment systems need to change. In the internet era people expect instantaneous results, something our payment systems can’t achieve. “Just think how mad we get when our netflix buffers even for just a few minutes. Soon this standard will apply to our car payments or sending money to a friend, that’s what your consumers will expect.”

The controversial BitLicence has proponents on both sides. In an exclusive interview with BraveNewCoin the President of the Bitcoin Association, Greg Simon, expressed his view that oversight was inevitable, “I knew Bitcoin was going to be regulated, it was quite obvious. You couldn’t have companies and consumers exposed to risk without some sort of regulatory control.”

Simon is a founding member of a rewards program which launched in late 2014 and has a vested interest in the NY regulatory scene. Simon’s company, Ribbit.me, are soon to move their Head Quarters to New York.

“Rewards programmes are popular all around the world. Rewards are not viewed as currency and therefore a reward that we earn which is built on a blockchain platform, also should not be treated as currency.”
— – Greg Simon, Bitcoin Association President

Before becoming a blockchain enthusiast, Simon was an international banker and handled risk management. In his opinion the following excerpt from the New York BitLicense explains that digital reward tokens are exempt from the new regulation. “Digital units that can be redeemed for goods, services, discounts, or purchases as part of a customer affinity or rewards program with the issuer and/or other designated merchants or can be redeemed for digital units in another customer affinity or rewards program, but cannot be converted into, or redeemed for, Fiat Currency or Virtual Currency.”

The exemption from BitLicense will simplify his move to New York, ”we are very happy that this is one thing that we are not going to have to concern ourselves with immediately. We can focus on what we really want to do and that’s building the world’s best rewards programme on the blockchain,” said Simon

Simon’s Reward program, RibbitRewards, leverages blockchain technology. He believes that the fungibility of the digital token is the responsibility of the user. “A consumer will be able to aggregate value into their favourite rewards very easily. Ribbit.me however will not provide any conversion or redemption of any rewards not on the coalition blockchain into fiat or Virtual Currencies. Perhaps there will be unrelated third parties who might see this as an entrepreneurial opportunity though.”

Although the exemption may well support a blockchain based rewards program, from Simons study of the BitLicense, and through discussions with other Bitcoin entrepreneurs, he explained that some aspects of the regulation may be a burden.

Simon appreciates that giving startups room to innovate and ensure customer protection is a difficult line for regulators to walk, “either extreme is bad. Over-regulation will kill innovation, under-regulation will put people at risk. It is really hard to find the right line.”

Startups entering the Bitcoin space must now consider the requirements of financial statement auditing, alongside capital and collateral requirements.

Currently the BitLicense stipulates that a startup is required to pay $5000 to apply for the BitLicense. Funds and additional fees required to operate a Bitcoin startup under these regulations are ambiguous. which has caused a stir in the Bitcoin community. “It may lead to startups that don’t have enough money to possibly setting up shop somewhere else and not in the United States,” Simon advised.

From running his own startup, Ribbit.me, Simon knows that legal expenses can be financially crippling. “It’s very quickly that you can run up a large legal bill,” he said. “That money should be spent for innovation and development.”

On the positive side, he is encouraged by the inclusion of a conditional licensing provision. This will be very helpful to startups in the space who can operate while they are building a regulatory compliant infrastructure.

“I think that this is the year we are going to see some really strong interested investment and really great innovative ideas on how to use a distributed ledger for all of the things we all want to see, so it is really really exciting.”
— – Simon

Simon explained that large institutions are trying to find ways to embrace blockchain technology, and will be a core component of Bitcoin’s adoption rates this year. “People say the banks hate bitcoin, but part of our business requires me to have almost daily conversations with global accounting firms, global finTech firms, or even global banks, and I can tell you not a single one of them fear Bitcoin.”

“Just think of the quality of life of a person who lives in a more rural country. He doesn’t have a bank account and the reason he doesn’t have a bank account is not because banks hate him. It is because they can’t make a profit by giving him a bank account. That’s the way capitalism operates. If a bank can profit by providing him a bank account, they will. Bitcoin makes that possible, for a bank to provide a bank account to anyone with a cell phone, even SMS. So if you are a guy in the middle of a village, in Guatemala and you want a bank account with a local bank, they will incorporate blockchain technology into their infrastructure. If they can give him a bank account that is accessible by phone and they can make a small fee of his bank account. This is the sort of thing I think banks are looking at. They are going to make money, but by empowering so many people.  As soon as an entrepreneur builds the infrastructure they are willing to buy.”
— – Simon

Despite believing BitLicense is a little too strict, Simon remains encouraged by its direction. “If you think about the potential for Bitcoin to disrupt pretty much every aspect of our lives that require trust, since what we are really talking about is the commoditization of trust, we can shrug off a pessimistic view of the future and replace it with something very optimistic.”