Companies burdened by BitLicense’s real cost

The August 8 deadline for New York's bitcoin companies to apply for BitLicense saw many companies of the cryptocurrency ecosystem halting their operations in New York.

While different companies cited different reasons for their unwillingness to apply, the hefty non-refundable application fee of $5000 played a crucial part. On the other hand, the companies that did apply for the BitLicense had to bear high cost not only in monetary terms but also non-monetary terms.

While speaking to CoinDesk, George Frost, executive VP and chief legal officer at Bitstamp, the world's third largest exchange in terms of BTC/USD trading volume, said, "Applying for the BitLicense is an expensive and difficult process, as many have noted. Some other firms have chosen to abandon the New York market entirely, rather than comply. We do not fault them for doing so".

"Our UK parent company has contributed a lot of time, expertise and money in the BitLicense effort, but much of this investment will benefit the entire Bitstamp group," said Frost.

However, unlike Bitstamp, which employs nearly 50 people reportedly, there are other relatively smaller and new start-ups like MonetaGo, who have also applied for BitLicense.

"Given that we are a new startup company we have been extremely diligent with our expenditures. In terms of hard costs we've spent approximately $50,000 ... by far the biggest costs have been the man-hours to date," said Patrick Manasse, chief compliance officer.

Patrick said that the team invested nearly 1,200 hours to compile the documentation for the BitLicense application, and pointed out that an additional 2,000 man hours had been already spent in formulating MonetaGo's global compliance program. 

"Add to this programmers and developers putting in place systems and service providers, and you start to get a sense of the size and scope of the undertaking," he said, noting: "If all the hours were added up, the total would easily be upwards of a quarter million US dollars."

Yet another cryptocurrency exchange, Bittrex, applied for the license. Bill Shihara, Bittrex founder, told CoinDesk that the process is expected to have cost his company somewhere between $18,000 and $20,000, along with nearly 80 hours of compiling and reviewing the documentation.

"I am sure larger companies incurred much higher costs than we did ... we were lucky that we had a lot of the paperwork already available."