Filed Under:  U.S. & World

Coinbase Reportedly Operating Without Licenses

Contributed by on January 28, 2015 at 12:15 pm

Digital Render of BitcoinSupporters of Bitcoin rejoiced Monday when Coinbase opened the first regulated Bitcoin exchange in the U.S. And while the company announced that it had received regulatory approval in nearly half the states in the U.S., including California and New York, but representatives from both states state otherwise.

A spokesman for New York’s top financial regulator stated that the company did not actually have licenses to operate as a Bitcoin exchange in the state. A “consumer alert” was also issued by California’s top financial regulator, warning that “Coinbase Exchange is not regulated or licensed by the state”.

Benjamin M. Lawsky, superintendent of New York’s Department of Financial Services, is working with several Bitcoin companies, including Coinbase, on licensing. But Mr. Lawsky’s office stressed that it has not issued any licenses to “virtual currency firms” as of yet. Mr. Lawsky’s office is working on implementing a BitLicense system.

Coinbase did say on Monday that its exchange was regulated because it was able to obtain money transmitter licenses in 24 states. But regulators in California state that they have not issued any licenses for any digital currency exchanges and have yet to investigate if they’re safe for consumers.

A spokesperson for California’s Department of Business Oversight made it clear that Coinbase isn’t breaking the law, but that consumers should be aware that the exchange is not licensed or regulated in the state of California.

What does this mean for Coinbase? Here’s what you need to know:

  • Thus far, there has been no indication that Coinbase will face any penalties for working with residents of New York.
  • Tension could set back Coinbase’s efforts to improve and secure Bitcoin’s reputation.
  • Coinbase is not the first company to move ahead of regulators, but this move could cause unwanted tension.
  • Coinbase will continue to work with regulators to obtain the necessary licensing to operate as a Bitcoin exchange.