Digital currency is “one of the most promising emerging technologies for the next 10 years,” according to Joi Ito, director of the MIT Media Lab. More than $600 million has been invested by venture capitalists in startups building on bitcoin and related digital currencies. Additionally, companies like UBS, IBM, and Intel have established labs to identify opportunities to leverage digital currency.

Bitcoin, and the underlying technology, blockchain, let people transfer money without a bank. It also allows them to write simple, enforceable contracts without a lawyer, or, turn physical items like real estate or tickets to the ball game or concert into digital assets that can be sold with low to no transaction fees.

Many are projecting that the impact of digital currencies will be similar to that of the Internet–disrupting traditional industries, challenging existing regulations, and significantly increasing the volume of commerce by dramatically lowering the cost to transact and establishing trust between two previously unknown parties.

Like any emerging technology, it is still unclear exactly how Bitcoin and other crytpocurrencies should be regulated.

If regulation is done right, it will increase investment in digital currency startups, create jobs and allow consumers to receive cutting-edge financial services of the future, faster and safer.

This month, the superintendent of the New York Department of Financial Services (NYDFS), Benjamin Lawsky, is expected to issue a new regulation called BitLicense. The goals for issuing the BitLicense include protecting consumers from fraud and preventing money laundering and other illicit uses of cryptocurrencies.

However, because the NYDFS is the bellwether for financial regulation, the rules it creates, good or bad, could be replicated by the majority of states in America. If replicated, Bitcoin companies will face substantial regulatory burdens and only a handful of the most well-funded companies will survive— not because of the best product or service, but because they have access to the most money.

My goal in writing this post is to share with Superintendent Lawsky, his hardworking staff, and the public, what I believe to be the four critical flaws of the BitLicense and the unintended consequences the regulation will likely create.