Two and a half years after the New York Department of Financial Services’ “BitLicense” regulations forced a mass exodus of cryptocurrency and blockchain companies, the Empire State is attempting to repair its reputation as a cryptocurrency destination.
A positive first step? Listen to the remaining companies, as Democratic New York Sens. David Carlucci and Jesse Hamilton did on Friday at a roundtable with stakeholders from across the industry who were eager to share their questions and concerns over a possible reform of the regulation that’s make-or-break for many cryptocurrency companies looking to do business in the state.
The senators told the businesses in attendance that legislation aiming to reform the BitLicense regulation could be coming “very soon,” and understanding where the concerns of businesses lie “to get some views” before proposing legislation will be a key part of successful reform. While no promises of legislative action were made, both senators agreed to host another roundtable within the next few months to continue exploring ideas, and to release a report noting the concerns raised and potential solutions shared during the roundtable.
The latest conversation, at the very least, provided a much-needed grievance session for companies still uncomfortable meeting the demands of the regulation.
Following BitLicense’s enactment in August 2015, New York saw a slew of companies end their business in the state. The $5,000 cost of the application to the NYDFS and the subsequent legal fees, many small companies said, was not worth the promise of doing business in the largest banking city in the nation. Their complaint was not just based in frugality — only six BitLicenses have been granted in 30 months, forcing companies to weigh the cost of denial against departure.
The regulation requires a licensed company to submit to a biennial examination of financial records, management policies and general compliance, while also granting the superintendent of Financial Services the ability to regulate mergers and changes of control in virtual currency transmission companies. Further complicating matters, an anti-money laundering program and a cybersecurity program are also required to obtain a BitLicense.
Genesis Mining, a cloud mining company and one of the companies that left in December 2015, claimed the regulation “stifled innovation.” Bitfinex called the regulation “extremely invasive” and suggested acquiring a license would compromise the privacy of its user base. Bitquick cited the “extensive regulations” as their reason for leaving, while Kraken informed users that the price of a BitLicense did not exceed the benefits of holding one.
The vast majority of these companies fled in 2015, so Hamilton and Carlucci are focused on improving the regulation environment for the remaining few and with the hope of attracting more. One of the more popular solutions proposed among the participants was abandoning BitLicense’s one-size-fits-all model of regulation of companies that deal with different aspects of cryptocurrency.
“We need to divide bitcoin and crypto, the ICOs, the tokens, from blockchain,” said Gilles Gade, chief executive of the New Jersey-based Cross River Bank, Coindesk reported. “There’s no reason the technologists need to be subject to overbearing licenses and that’s what’s hindering innovation.”
Kevin Batteh, chief policy advisor for the Chamber of Digital Commerce, a cryptocurrency advocacy group, agreed, saying “When you blanket it across the entire industry, that’s where you have a problem.”