Coinbase, a popular California-based digital currency exchange, was awarded a coveted license to deal in digital currencies in New York becoming only the fifth such firm to win approval to operate in the state.
Coinbase Inc., a subsidiary of Coinbase Global Inc., was awarded a so-called bitlicense by the New York State Department of Financial Services, and an now legally operate as a money transmitter, online lender and digital currency exchange, according to a NYSDFS news release published Tuesday afternoon.
“New York is committed to fostering and encouraging the long-term growth of new industries throughout the state while enforcing all necessary safeguards to protect our markets and consumers,” said Financial Services Superintendent Maria T. Vullo in a news release.
New York has taken a relatively hard-line tacked to granting digital-currency companies clearance to operate within its borders. The Empire State is the only state that requires cryptocurrency firms to obtain a license to operate. The license has been widely maligned by members of the digital-currency community, who claim it stifles innovation.
Coinbase co-founder and Chief Executive Officer Brian Armstrong said NYDFS’s decision reflects Coinbase’s efforts to operate the world’s most secure and compliant digital-currency exchange. He said the company planned on expanding in New York.
Coinbase first applied for the bitlicense in August 2015.
Obtaining a bitlicense comes at an interesting time for Coinbase. In November, the Internal Revenue Service sent the firm a subpoena ordering it to turn over customer records from between 2013 and 2015.
In a Medium post published last week, Armstrong said the company has invested heavily in its compliance efforts. About 20% of its staff works on compliance in some form, he said. Also, the company has taken pains to comply with the agency’s March 2014 guidance on virtual currency by filing 1099s—a type of tax form—for merchants who accept digital currencies.
Coinbase has also complied with requests for specific customer records to ensure that customers are paying the proper taxes, he said, but noted that the broad-ranging “John Doe” summons “isn’t the best way for us to mutually accomplish this objective.”
The NYDFS approval for Coinbase also comes as bitcoin prices touched their highest levels in more than three years earlier this month, but soon sold off on news that Chinese authorities were poised to investigate digital-currency firms to ensure compliance with all local laws.
cost $900 on Tuesday, according to data from Coin Market Cap.