When Can a Business Adopt Cryptocurrencies?

There is a TON of confusion about how/when business can/or not adopt virtual currency like Bitcoin or others.

It all comes down to what license you have obtained and what those individual licenses allow you to do.

Important to understand — each license can have different lanes of engagement within it that may require additional licensing.

In order to touch virtual currencies, one needs Virtual Currency Business Activity License aka BitLicense first. Who does?

A person (whether an individual or a company) that engages in any following types of activities:

1. Receiving Virtual Currency (VC) for transmission or transmitting VC

2. Storing, holding, or maintaining custody or control of VC on behalf of others

3. Buying and selling VC as a customer business

4. Performing exchange services as a customer business

5. Controlling, administering, or issuing a VC

Thus, so called “BitLicense” then allows to engage in these activities:

- Virtual currency exchanging and trading services

- Electronic money transmitting*

- Issuing prepaid access/stored value*

- Selling prepaid access/stored value*

BUT, there’s a but…

The thing is, those *s (starred) require yet another license IF it involves actual fiat money, called NY Money Transmitter License. That’s why some institutions have NO option to accept fiat payments & serve as on-ramp. Is that it? Well, not quite. Let’s get on.

So based on above -

different levels of engagement:

1. Virtual Currency License and Money Transmitter License

• To offer services for buying, selling, sending, receiving, and storing virtual currency + fiat money involvement

2. License to offer custody services for virtual currencies

• An entity needs to be formed as a Limited Purpose Trust Company

• Generally acting as a depositor or safe-keeper for securities or mortgages

Now we can FINALLY understand the NYDFS green list. So based on the above that’s why we have 2 types of green-listed coins — each with their own purpose and distinct licensing:

Listing Coins (a-z): BUSD, BTC, BCH, ETC, ETH, GUSD, LTC, PAXG, PAX, XRP

Custody Coins (a-z): BUSD, BTC, BCH, ETH, GUSD, LTC, PAXG, PAX

Circling back to our PayPal friends. Let’s reverse engineer backwards what sorts of licences they might have. PayPal has announced that one cannot deposit or withdraw Virtual Currencies directly — so that leaves out custodial services all together.

Winner: BitLicense

Fun Fact:

Did you know that NO privacy coin can be self-certified/green-listed? Also an entity cannot self-certify any coin that is designed or substantially used to circumvent laws and regulations (e.g. gambling coins).

MyCoinChange

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