New York Bitcoin Industry Recovering After BitLicence Fallout

Regulatory environments are slowly evolving, and many digital currency operations are now required to have specific licenses in order to offer their services. In a post-BitLicense environment, many companies have decided to exclude New York state clients, the home of Wall Street.

There are a handful of companies that have taken the road less travelled. itBit and Gemini have obtained Trust Charters, avoiding the BitLicence altogether, which allows them to offer services in one of the world’s most lucrative markets. itBit obtained its charter in May, and started operating a fully compliant and regulated bitcoin exchange, Gemini has has now joined them.

Cameron and Tyler Winklevoss are venture capitalists, internet entrepreneurs, and the driving force behind Gemini, Latin for “twins.” The brothers first discovered bitcoin in 2012. “We were immediately taken in by Bitcoin’s elegance and enormous promise, and as we started to learn more, we became convinced that Bitcoin was the future of money,” Tyler stated in a Reddit Ask Me Anything

“It was immediately obvious to us how awesome and powerful this technology was. People laughed, as they always do, when something is awesome, powerful and new, but that only helped to fuel our fire.”
— – Cameron Winklevoss

Trust Companies are granted charters by the New York State Department of Financial Services (NYDFS), a regulatory body that supervises a number of different types of institutions, from private bankers to Credit Unions, Banks, and Trust Companies. “A trust company is an entity that is authorized by the Superintendent to exercise fiduciary (trust) powers,” states the NYDFS.

“These companies provide a number of fiduciary responsibilities. The ‘trust’ name refers to the ability of the institution to act as a trustee – someone who administers financial assets on behalf of another.”
— – NYDFS

As Trust Companies, itBit and Gemini act as a custodians for their US customers assets. All deposits must be backed with capital reserves and the exchanges have a legal duty to act on behalf of their customers interests. itBit explains that, “the trust charter application process is far more rigorous than that for obtaining the BitLicense or money transmitter licenses.”

Accompanying their launch, the twins conducted an ‘Ask Me Anything’ on reddit. They explained that Gemini has been built on top of four key tenets, product, security, compliance and licensing.“Our view of the world is that you have to get all four completely right,” said Cameron.

Cameron stated they have taken licensing requirements very seriously, along with a secure cold storage vault system, “which should hopefully be music to most people’s ears,” said Tyler.

With what the twins call a ‘security first’ mentality, some of Geminis very first employees were security experts. Their Chief Security Officer, Cem Paya, has worked with AirBNB, Google Wallet and Microsoft’s security group. “We’ve used the best practices, multi-signature technology, hardware security modules, geographically distributed vault systems we’ve spent about a year and a half building,” said Tyler

The twins advise that they are currently operating in over half of the States in America, and are committed to being fully operational in all 50 states at a later date. According to Cameron Winklevoss, some states will require the exchange to file as a Money Transmitter, “but that was something we couldn’t do until we were licensed in New York”

“There’s contingencies around our approval in various states. And that’s part of the system of Federalism that we’re dealing with, but suffice to say we hope to be operational in all of the U.S. as soon as possible.”
— – Cameron

According to their website, itBit are able to provide services to customers across the US and globally, out of their head offices in New York and Singapore. “With the trust, itBit is the first regulated bitcoin exchange based in New York State able to accept customers from across the United States,” states the company site. “itBit works with regulators around the world to shape the future of bitcoin and digital currency regulation. We are focused on meeting global regulatory requirements while adapting to the ever-changing compliance landscape.”

Gemini will follow suite in suite in due course, expanding into Europe and Asia, while also building upon its services. This includes considering other digital currencies. “You’ll notice that we didn’t put the name ‘bit’ in our name on purpose – with that said, we’re going to wait to an extent to see what the users are demanding and what people are asking for, rather than try to guess ourselves,” said Cameron

“In terms of what features we end up adding, we’re really going to listen to our customers […] if there’s enough demand and it makes sense, we’ll include them.”
— – Tyler Winklevoss

itBit, on the other hand, recently announced that their new project will use its own proprietary token. Set to launch at the end of this year, Bankchain will will focus on the precious metals industry.

The Chief Executive Officer of itBit, Charles Cascarilla told the International Business Times, "The fact is that in the current gold market there is no delivery versus payment. Payments are happening either one day to five or six days difference from the movement of the asset. So that creates a lot of risk in the market and it’s a big market. It trades $250bn a day which is more than US equity market. It’s like the fifth or sixth largest asset class in the world – US dollar versus gold."

“You can take the gold that you own on Bankchain and it’s tokenised and move it around to institutions and use it as collateral. You could move it to the Chicago Mercantile Exchange and use it as collateral at the CME. At the end of the trading day you could move it to an Asian exchange, and then move it to Euroclear or other institutions."
— – Charles Cascarilla, itBit CEO

Gemini’s upcoming Exchange Traded fund (ETF) garnered a lot of interest from the Reddit crowd. This type of fund owns tan underlying asset, such as stocks, oil, gold bars or in this case, bitcoin.

This provides ETF shareholders with exposure to the underlying assets price movements, but without the need to purchase, store or handle the physical resource. The twins advised that they are unable to publicly discuss the ETF regulatory process, “but rest assured we’re working as hard as possible to make it happen and we want this as much as anyone else.”

Cameron compared the current state of bitcoin to that of pre-broadband internet, describing how hard it would have been to imagine the internet of today 20 years ago.“right now there’s lots of companies like Gemini trying to build the bridges and tunnels and connect the island of bitcoin to the mainland of finance and bringing people into the system.”

While itBit and Gemini both circumvented the digital currency focused BitLicence, there is one company that didn’t. Circle Internet Financial recently became the first company to be approved for the license and itBit see this as a positive move, “The BitLicense is an important step forward in encouraging wider consumer confidence and industry acceptance of digital currencies and technology. We understand there’s various levels of enthusiasm for it but, net-net, this is a positive for the industry.”