Anyone who wishes to carry out regulated cryptocurrency-related transactions within the state of New York or with parties within New York must have a BitLicense. In the guide, find what it is, why it was created, and how to receive it.When Bitcoin (BTC) was created in 2008, there was no way to predict the digital currency’s future. But as the cryptocurrency grew, a need for regulation of Bitcoin was apparent, as it drew several criminals, con organizations, and tax dodgers due to the lack of regulations. As a result, BitLicense appeared.BitLicense is a business license of virtual currency activities, issued by the New York State Department of Financial Services (NYDFS) under special regulations designed for companies.BitLicense performs a wide range of crypto regulatory functions within New York, including cryptocurrency transmission, exchange service provision, and digital asset management.Anyone who wishes to carry out regulated cryptocurrency-related transactions within the state of New York or with parties within New York must have a BitLicense. However, individuals making or receiving payments are exempt.Background for Crypto Regulation GuidanceCryptocurrency faced a long and rocky road on its climb to the top of the financial world. One of the biggest challenges along that road was the lack of trust for the technology from governments and financial governing bodies.Cryptocurrency technology defies regulation by its nature. Its decentralization principle guarantees anonymity in the bargain. It is no surprise that so many governments are so opposed to the idea of cryptocurrency.The lack of regularization means crypto can be used for numerous illegal activities like money laundering and tax evasion. And decentralization means there’s no governing body, leading to a general lack of security for investor funds. These problems required solutions before crypto can genuinely be trusted in most countries.BitLicense was the first crypto regulatory guidance of its kind. However, several regulatory frameworks and legislation have sprung up in its wake, like the Swiss FINMA license or the UK FCA license. Many countries, even those with a historically good relationship with cryptocurrency, are starting to realize the importance of regulation.How Did BitLicense Arrive?The NYDFS first held public hearings on the subject of the Virtual Currency regulations back in November 2013. At that time it came up with BitLicense for the first time. In July 2014, the NYDFS released details of BitLicense that included a list of the proposed rules and regulations on Bitcoin trading in New York.The acceptance of BitLicense proposals changed the crypto-economic landscape of 2015. Over 20 companies applied, with crypto company Paxos receiving the first trust charter and Bitcoin wallet, and Circle Internet Financial Limited receiving the first BitLicense. Yet, 10 crypto companies ceased all activities in New York, an act of protest against what they considered unfair legislation.Ever since it arrived in the crypto economy, the NYDFS has only handed out BitLicenses to 25 crypto entities. These fortunate few are all well-known and trusted names in the crypto space. Notably, companies like Coinbase (NASDAQ: COIN), Gemini, Bittrex have been rejected on the grounds of insufficient security and legality.BitLicense Application ProcessThe process of acquiring a BitLicense can be daunting for new applicants. It is quite difficult and expensive, with an initial fee of $5000. License holders and applicants say that time allocation, legal fees, and other costs can drive that amount up to $100,000, depending on the size of the crypto entity.Parties interested in getting a BitLicense first apply to the Nationwide Multistate Licensing System and Registry (NMLS), a secure online registry for processing and managing state licenses. Applicants fill a Company request form that they can submit only once. Then they receive an NMLS login info, which a designated Primary Account Administrator uses to access the NMLS, submit relevant documentation to state regulators and manage company information on the registry.The approval process can prove arduous, especially for smaller companies or crypto startups. It includes a 30-page application, a 4-page checklist of required documentation, a 44-page regulations checklist, several fees to be paid, and additional information collected. However, the NYDFS does not set out to make the process complicated, recognizing a need for the ease of approval process. They are instituting a conditional license that allows trade. At the same time, the company completes the approval process for BitLicense.Requirements for ApplicantsThe list of controls targeted by BitLicense is long, and those wishing to acquire it must fulfill all of them. The requirements are as follows:BitLicense requires a company to comply with all applicable federal and state fiscal policies and have documented compliance policies.The license holder has to maintain a specific and determined amount of assets to ensure their financial stability and continuing operations. The NYDFS superintendent who considers the company’s records and conditions determines this amount.License holders must maintain a security bond or trust account in US dollars to protect customer assets and funds. The NYDFS superintendent also determines the amount.The superintendent must also approve changes in business models, services, products, control of company, mergers, or partnerships. The superintendent must also approve all business activities.License holders must maintain records, accounting books, and other similar documentation going back at least 7 years for all accounts or transactions. Besides, they must be ready to provide these to the NYDFS at any given time.License holders must submit to regular examinations and inspections and submit financial reports and audited financial disclosures. These submissions and examinations shall occur alternatively on a quarterly, annual, and bi-annual basis. They shall focus on checking finances and practices to determine if the license holder is in good financial condition and has completed compliance with all regulations.Anti-money laundering and Cybersecurity programs must be put in place, which means implementing a KYC program and a Chief Information Security Officer. License holders must provide information on fraudulent transactions, hacks, and data breaches to the NYDFS when they occur. This provision also extends to Business Continuity and Disaster Recovery plans.License Holders must tailor their advertising and marketing to protect consumers’ interests by disclosing all risks associated with their products and services before the transaction. They must also display the phrase “Licensed to engage in Virtual Currency Business Activity by The New York State Department Of Financial Services.”BitLicense Framework HighlightsThe process of acquiring BitLicense is time- and effort-consuming. However, once receiving the license, companies will get a number of accompanying benefits. First of all, it protects them from unnecessary lawsuits and fraudulent investors. Secondly, it gives special permission for companies involved in:To sum up, BitLicense is a green light to legal crypto-activity protected on the state level.ConclusionWhen the BitLicense regime arrived, many crypto enthusiasts saw the regulatory framework as stifling and unconstitutional. However, one cannot deny the efficacy of BitLicense in protecting the interests of the investor. The framework has weeded out companies with poor business models, shady finances, and platforms full of scammers.The NYDFS continues to revise the BitLicense framework. It is working on making the process of approval much more straightforward. The NYDFS already allows for a conditional license that makes the application process much easier for smaller businesses. In addition, it is continuing effort to get more crypto entities onboard with the regulatory framework.