Bitcoin Exchanges Kraken and Bitfinex Denied BitLicense, Stopping Services in New York State

Kraken, as well as Bitfinex, two leading bitcoin exchanges, have said they will not apply for a BitLicense in New York.

The development is in response to the BitLicense, a regulation for digital currency businesses in New York State, which has been criticized by the digital currency community. Previously, New York State regulators had set August 8 as the application deadline for companies that already provide related services in New York State.

So far, New York-based companies including Gemini, itBit and Bitstamp have applied for BitLicenses, while smaller companies, including bitcoin merchant processor GoCoin and altcoin exchange Poloniex, have said they will move their services out of New York State.

Kraken, headquartered in San Francisco, has a troubled relationship with U.S. regulators. Kraken stopped allowing U.S. dollar withdrawals in early 2014, which were not reopened until October. U.S. residents are still unable to trade dollars on the exchange.

Kraken said:

"While we believe the legal protections from New York State are valuable, they come at a prohibitive cost, and therefore, we have no choice but to withdraw our services from the state."

In an interview with CoinDesk, Kraken’s head, Powell, said the move could affect thousands of the exchange’s users, and hinted that there was a strong business motivation behind it.

Bitfinex, an exchange headquartered in Hong Kong, was even more direct, announcing that it would withdraw its application for BitLicense.

The two exchanges said they will continue to monitor the regulatory situation in New York State and look forward to resuming open exchange services.

The application fee for a BitLicense is reportedly $5,000, but this figure does not include additional document preparation costs and staffing costs. In view of the cost, Powell hinted that Kraken will shift its focus to better places to allocate its expenses.

"Our money will be spent on blue oceans and green pastures, and maybe when New York State is in a better place and we come back, we'll have more money," Powell said.

Bitfinex Fund Withdrawal

Bitfinex said that based on the decision to withdraw from New York State, they will revise their terms of service and point out that customers must withdraw their funds before 21:00 BST (British Summer Time) on August 15.

“We strongly encourage New Yorkers to use designated ‘locked withdrawal addresses’ so that we can automatically sweep funds sent to one of your deposit addresses in the future,” the exchange wrote. “Failure to set these locked withdrawal addresses will result in future deposits being automatically liquidated.”

The exchange said that after the August 15 deadline, any currencies users hold on the exchange will be automatically converted to U.S. dollars.

“The resulting USD balance is accessible to users at any time,” Bitfinex wrote in a post.

It is reported that New York residents will not be able to use any services of the exchange, including fiat currency and digital currency trading services.

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