New York’s Digital Currency Task Force is a positive step to enable New York legislators to gain an understanding of cryptocurrencies and cryptoasset markets, as well as how other states (such as Wyoming) have sensibly regulated them in order to balance the encouragement of robust business innovation with consumer protection.
New York’s BitLicense regulation is sorely due for an informed revamping. The regulation broadly sweeps under the umbrella of “Virtual Currency Business Activity” nearly any business that transmits, exchanges or holds blockchain assets on behalf of others in New York (or on behalf of a New Yorker), forcing such business to become licensed.
Yet since the regulation went into effect four years ago, on average fewer than four licenses have been issued per year. For context, the New York State Department of Financial Services (DFS) supervises approximately 4,400 traditional finance and insurance firms.
At DFS’ current rate of BitLicense issuance, it would take New York more than 1,250 years to reach parity between the number of traditional finance licensees and crypto/fintech licensees in the state. New York cannot rest on its “world’s finance capital” laurels that long—or even for one-thousandth that long.
In addition, New York’s DFS is suing the U.S. Comptroller of the Currency (which charters all national banks) in an attempt to stop the federal chartering of special purpose fintech firms, which hold the promise of leveraging blockchain distributed technologies to innovate in the areas of microlending, payment transmission and many other areas of traditional finance ripe for disruption.
The combination of overbearing and overbroad regulation, failure to license and territorial skirmishing has left New York—and by extension in many ways the United States—as “hostile territory” for fintech innovation and investment.
In contrast, in the early days of the internet, New York and the U.S. Congress avoided the temptation to overregulate and actually legislated to encourage innovation and investment. Hopefully the Digital Currency Task Force will have the same foresight, and help lead New York back into the forefront of fintech innovation and investment.