As a result of hearing concern among BitLicense applications, the New York Department of Financial Services (DFS) announced two practices in a notice regarding its review of BitLicense applications.
Before continuing: BitLicense applications are submitted through the Nationwide Multistate Licensing System & Registry (NMLS), using an online system through which various financial service license applications can be submitted for multiple states. Companies that apply for a BitLicense through the NMLS portal can find a checklist of requirements for a BitLicense application on the website. Applicants are also encouraged to contact DFS’ virtual currency team directly at VCLicenseQuestions@dfs.ny.gov with any questions about particular items on the checklist or other aspects of the application process.
Limiting Substantive Review to Applications Ready for Such Review
The first DFS practice announced in that it considers a BitLicense application to be ready for substantive review only when it includes all the documents required as part of the NMLS application process—as reflected in the checklist—and each document appears to be adequate in terms of organization and level of detail. Applications that are not yet in this state will be deemed unready for substantive review until the missing items have been provided and will generally not be reviewed, except for an initial intake process to determine whether substantive review is appropriate. (Note that this notice does not modify the regulatory requirements for licensure.)
If DFS has deemed an application ready for substantive review, and later discovers that any of the required items are missing or facially inadequate, the application will again be deemed as unsuitable for substantive review and will generally not be reviewed further until all the missing items are provided. Similarly, if material issues emerge that may make in-depth application review inappropriate—such as the fact that a related company integral to the applicant’s business model appears to need a BitLicense or money transmitter license but has not yet applied or that the applicant’s business plan has been modified in a way that renders previous submissions inaccurate—the application will generally not be reviewed further until those issues are fully addressed.
DFS believes this practice will improve the processing of BitLicense applications in several ways: First, it will expedite the review of applications that are considered ready for substantive review; second, it will result in more applications being ready for substantive review; and lastly, DFS says, this policy will result in the more effective and efficient use of its resources.
Limiting the Number of Deficiency Letters for a Given Set of Requirements
In general, once substantive review of an application begins, DFS staff will convey to the applicant in detailed deficiency letters (or emails) information about any deficiencies in the application. These letters will include a return date by which a complete response is due. DFS staff will be available during the response period to answer questions from the applicant.
Under the second practice, if all deficiencies involving a particular application requirement or set of requirements (for example, Bank Secrecy Act/anti-money laundering; cybersecurity; and/or background checks/vetting) have not been fully and effectively addressed by the end of the response period for the third deficiency letter addressing the requirement(s), DFS may, without further notice, deny the application.