In New York, the BitLicense business licensing rules have proven to be the bane of more than a few cryptocurrency firms over time. That reality has led to there being little support for the BitLicense in some circles of the space.
That’s why many eyes widened in the crypto arena on December 11th when the New York Department of Financial Services (NYDFS), the state of New York’s top financial watchdog revealed it was proposing some key changes to the BitLicense rules that, if enacted, would change how crypto enterprises approach supporting specific coins in the state going forward.
In the past, the NYDFS has worked with crypto exchanges and crypto ATM operators on an individual basis to rather painstakingly approve each enterprises’ coin listings one by one. Under the regulator’s new proposed rules, two key changes would be made to this system.
Changes May Be Coming, But Are They For the Better?
The first change would be the creation of a list of cryptocurrencies that have been approved by the NYDFS to be supported by any BitLicense holders in the state, so long as notice of listing is provided; this modification would mitigate the watchdog from having to go through one-by-one approval processes in many cases.
Moreover, the second change would involve the NYDFS creating a “proposed model framework” for “company coin-listing policies” that the agency would expect firms in the state to generally adhere to.
“An existing licensee [would] tailor the model framework to its own operations and risk profile and submit a proposed coin-listing policy for DFS approval,” the watchdog said.
These two principle alterations to the BitLicense rules are accordingly up for public comment until late January 2020, though it remains to be seen how stakeholders in the state will respond to these proposed changes. In explaining why these changes were being put forth, NYDFS Superintendent Linda Lacewell said:
“New York is the center of both innovation and consumer protection, and the Department must strive to deliver speed to market and continually adapt to keep pace as the financial services industry continues to rapidly evolve. This is an important first step in our review of our virtual currency regime and is designed to make it easier for those who have obtained a New York license to periodically add new coins to their existing products.”
To date, only 18 companies have been awarded the BitLicense since the regulatory system began in earnest in 2015. These firms are Circle, Ripple, bitFlyer, Coinbase, NYDIG, Coinsource, BitPay, Square, Xapo, Genesis, SoFi, Zero Hash SXCM, Bitstamp, Tagomi, Cottonwood, LibertyX, and Robinhood.
In her Wednesday remarks, Superintendent Lacewell noted these companies will carry over their existing BitLicenses even if the aforementioned regulatory regime modifications are implemented.
America’s Crypto Rules Leave Much to Be Desired
Since being enacted, New York’s BitLicense system has gained a reputation for being the most onerous state-level crypto industry legislation in the U.S.
Comprehensive federal crypto laws may arrive in the future that would supersede the BitLicense’s state-level authority, but such legislation has failed to materialize for now. That dynamic leaves the BitLicense as a prime example of the patchwork regulatory system that currently hinders the U.S. crypto sector.
For example, instead of having comprehensive rules to play by in all 50 U.S. states, crypto firms wanting to operate in America currently have to tailor their operations on a state by state basis, which is meticulous and calls for considerably tougher restrictions in some states compared to others.
With that said, the NYDFS will continue to do what it thinks is best for its constituents, and it’s the agency’s prerogative and mandate to do so. Yet one can help but wonder if the entire American crypto ecosystem would be better off with a single top-down regulatory framework that would mitigate the need for a state-level BitLicense regime altogether.