A Bitcoiner has been suing the New York Division of Financial Services over its ‘Bitlicense’ since 2015, claiming the regulation is too burdensome and precludes many from starting Bitcoin businesses.
Bitcoin entrepreneur and French national Theo Chino requested that a New York court grant a request for limited discovery or begin the process to dismiss the case. The request centers on the notion that the definitions of bitcoin between the two parties are too different, and more research is thus needed to better define Bitcoin. According to plaintiff Mr. Chino, the case “cannot be resolved without making further factual determination as to whether Bitcoin is a ‘financial product or service.’”
The case highlights whether the “virtual currency” regulation by the New York State Department of Financial Services was “designed and issued by Defendants-Respondents in an arbitrary and capricious fashion.”
The lawsuit’s most recent filing continues: “There are significant and irreconcilable factual differences between the arguments presented by Plaintiff-Petitioner and by Defendants-Respondents which can only be resolved through limited discovery. Those fundamental factual differences and disputes involve whether Bitcoin is a ‘financial product’ or service which impacts whether Defendants-Respondents had the authority to regulate Bitcoin, and whether Defendants-Respondents acted in an arbitrary and capricious fashion when they designed the Regulation.”
The court must grant such a request when a petition “is likely to be material and necessary to the prosecution or defense of the proceedings.”
If Bitcoin is not a “financial product or service,” then the NYFDS’ cross-motion to dismiss should be denied. Indeed, regulators worldwide continue examining the regulatory implications of bitcoin.
Government reports issued this year on distributed ledger technology, sometimes referred to as ‘blockchain’, imply market regulators are investigating related technologies in the context of current and possible future laws and regulations.
“It is premature to fully appreciate the changes that the technology could bring and the regulatory response that may be needed, given that the technology is still evolving and practical applications are limited both in number and scope,” reads a recent report by the European Securities and Markets Authority called ‘The Distributed Ledger Technology Applies to Securities Markets.’
FINRA stated in a report called ‘Implications of Blockchain for Securities Markets‘ that it “welcomes an open dialogue with market participants to help proactively identify and address any potential risks or hurdles in order to tap into the full potential of DLT, while maintaining the core principles of investor protection and market integrity.”
The UK Financial Conduct Authority (“FCA”), the Swiss Financial Market Supervisory Authority (“FINMA”), and the Monetary Authority of Singapore (“MAS”) have all created so-called “regulatory sandboxes” to better understand blockchain technology.
The hearing between Theo Chino and the NYFDS is scheduled for March 16, 2017 at 9:30 A.M.
Do you think it is time to regulate Bitcoin? Let us know in the comments section below.
Images courtesy of Shutterstock, NYFDS, Twitter
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