Digital asset exchange Shapeshift and its recently acquired hardware wallet maker Keepkey have announced that they are exiting the U.S. state of Washington. This is due to the state imposing strict regulatory requirements based on “Senate Bill 5031.”
Also read: Washington Politicians Defend Regulations as Cryptocurrency Exchanges Flee
Shapeshift & Keepkey Flee Washington State
Shapeshift announced this week that it is leaving the State of Washington, due to requirements of the new law known as Senate Bill 5031. The state’s regulators have declared that each blockchain service provider operating in the state needs a license under this law. The exchange described:
Under this interpretation of the law, we would now be required to ask permission from Washington before we buy and sell our own property for our own account. Moreover, we would be required to spend hundreds of thousands of dollars to maintain a license, only to extract our users’ personal information and store that information for hackers to steal.
Shapeshift asserted the regulators’ position likely “endangers customers, stifles growth, and generates unnecessary frictional costs for young innovators,” citing its similarity to the New York State’s Bitlicense. In addition, the exchange claims that the requirements offer little to no benefit to the state’s residents, given how the exchange is noncustodial – so the risk of loss to customers is minimal.
“We believe the position that Washington’s regulators have taken is unethical, wasteful, and reckless,” the exchange wrote. “We cannot expect the same people, and the same thinking, that designed, built, and promoted the legacy fiat financial system to do what is needed to build a better alternative.”
Furthermore, Shapeshift has recently acquired leading hardware wallet Keepkey. The Seattle-based company is also leaving the state. Shapeshift added:
Keepkey will now be moving its headquarters away from the State permanently. The jobs it has already created and will continue to create will leave with it as well.
The Exodus of Exchanges
Prior to Shapeshift, a few other companies have also left Washington State. In July, Poloniex exited because of the same reason. “After careful consideration of the Washington State Department of Financial Institutions’ interpretation of its financial services regulations, Poloniex will suspend Washington account creation until further notice,” the exchange announced at the time.
In March, Bitfinex said that it would not obtain a license to do business in the state. Then earlier this month, the exchange announced its departure from the U.S. market altogether because of strict regulations. Bitfinex cited licensing requirements as well as the U.S. Securities and Exchange Commission (SEC) considering Initial Coin Offerings (ICOs) securities subject to its laws.
Cryptocurrency exchange Kraken also left the state in March this year. The company cited “high cost of continuing to meet the regulatory compliance requirements imposed by the state,” as the reason. In addition, Gildera also ceased its service to Washington State customers in March. The wallet funding service was acquired by Kraken in December 2016.
The first major exchange to leave Washington State was Bitstamp, which left in December 2016 due to regulatory constraints. Meanwhile, Coinbase and Gemini say that they are licensed in Washington State.