Although being seen as an important leap towards general acceptance from the public and businesses, “BitLicense” – the proposal for regulating Bitcoin among other cryptocurrencies – could kill what digital currencies stand for.
First, there’s all the bureaucracy affecting businesses and invading citizens privacy as a requirement for licensing Bitcoin businesses. Some rules of the proposal include that a licensee needs to have policies and procedures to handle consumer complaints, to prevent situations such as the following up of Mt.Gox bankruptcy. Also, every firm must record and keep the identity and physical addresses of the parties involved – so much for anonymity.
In reaction to the “BitLicense”, American Eleutrhria, that hosts Bitcoin Mining Pools BTC Guild and Scrypt Guild in Nevada, is planning to shut down, affecting both pools. This kind of reaction is unlikely to be an exception to the rule, particularly after the approval of the proposal.
The Bitcoin economy may crash as licensing starts as most Bitcoin businesses aren’t used to official requirements and bank licenses. One potential outcome is that banks may approach to buy some of these businesses as soon as “BitLicense” is approved. Banks have infra-structures that comply to the New York State’s requirements and political power to move things in their interest. The digital currency industry is a fast changing one and the question is: what will happen next?