Although his actual tenure as New York City head of government begins in about 1.5 months, Eric Adams, the city’s elected mayor, has started running it publicly. Making Empire Metropolis more business and technology friendly is at the heart of Adams’ preliminary agenda and – to the delight of the crypto community – the upcoming mayor made his point by repeatedly claiming to be for all that Bitcoin (BTC) is, to be. .
In the days following his November 2 victory, Adams, a former Brooklyn district president and former police officer, made a series of crypto-friendly statements ranging from a promise to get three salaries first in Bitcoin to a proposal to include digital finance courses, are enough in the school curriculum.
However, the mayor’s office is only one of several centers of power that help determine the rules of the financial industry – and not the most influential. The current regulatory powers in New York State make it one of the more difficult US jurisdictions for crypto companies to navigate. So what power does the Mayor of New York City have to make real change?
New York State Cryptocurrency Regulations
The acquisition of a senior city official with an interest in crypto is a welcome development for one of the most important financial centers in the world. New York is considered one of the toughest jurisdictions in the United States to conduct digital asset-related business, according to Gary DeWaal, president of the firm’s financial markets and regulatory practice. Katten Law told Cointelegraph.
According to DeWaal, the main cause of this difficulty is that New York’s BitLicense regime has to license companies that conduct a wide range of crypto-related activities that involve New York State or its residents in financial services. .
These activities include receiving digital currencies for the purpose of transferring or transferring the storage, holding, or maintaining custody of cryptocurrency on behalf of others, to buy and sell cryptocurrencies, or to perform exchange services with a customer’s company and to control, manage a digital currency or output.
Konstantin Boyko-Romanovsky, CEO of blockchain company Allnodes, told Cointelegraph that the BitLicense is not required neither for mining operations nor for companies that offer their services and products in exchange for electronic money. “It’s a start, but it’s a narrow niche and it needs to be expanded,” he added.
Bo Oney, Head of Compliance at Bitcoin ATM operator Coinsource – one of the first to receive a BitLicense in New York State – says the purpose of these regulations has always been to protect consumers, deter bad guys, and establish operational and accountable obligations for Crypto company. However, Oney admits that managing these rules is often not seamless:
“It is true that the time and delay in getting your BitLicense can be frustrating. Optimizing the application process and improving correspondence times with NYDFS should be a top priority for improvement. ”
BitLicense side effects
Last week, the community-focused cryptocurrency project CityCoins launched NewYorkCityCoin (NYCCoin) – a digital asset that allows users to mine the city’s coffers while also offering rewards through the Stacks protocol and its native STX token to earn. Although CityCoins has not yet officially partnered with New York City for this initiative, Adams has enthusiastically welcomed the arrival of NYCCoin.
There is a catch, however. There is no legal way for New Yorkers to mine coins intended to aid their city.
Cointelegraph Senior Editor Jonathan DeYoung – a New Yorker who recently wrote a crypto guide to NYC for Cointelegraph Magazine – notes that as a resident of New York State, he has no way of buying STX as it is not listed on any exchange BitLicense is available:
“STX is required to mine NYCCoin, which means I cannot mine NYCCoin efficiently even though I live in NYC. Of course, you could use a VPN and buy it through a non-KYC platform like Binance, but it’s ironic that the average NYC resident would be banned from mining their city’s coin. ”
While this inconsistency could be fixed in the short term by a BitLicense holding exchange like Coinbase backing the token, in a more general scheme this suggests that the current management of the New Yorker regime could cut off important pieces of the digital asset infrastructure.
Enforcement is not friendly
Another interesting source for crypto companies looking to provide services to New Yorkers is the New York State Attorney General. Letitia James – the acting attorney general who has announced her intention to run for governor next year – has in the past pursued harsh coercive measures against players in the crypto industry and issued numerous warnings about the dangers of cryptocurrency trading.
In fact, even before James took office in early 2019, NYAG was taking a closer look at the digital assets business. DeWaal von Katten commented on Cointelegraph:
“The publication of the report of the Virtual Market Integrity Initiative by the New York Attorney General in September 2018 was named by certain cryptocurrency platforms and their compliance with a number of best practices or allegedly problematic – after certain relevant information was voluntarily provided by platforms – are not helpful in promoting New York as a blockchain-friendly local. ”
This approach, according to DeWaal, can be better described as public attribution and shame than “removing the bad apples through the right legal process”.
What can be done
Introducing changes to the BitLicense regime that will allow more companies to lift the compliance lock and streamline the approval process could be an important step in making New York an established crypto destination. However, this was not in Adams’ hands, as DeWaal put it:
“Ultimately, it will be up to the New York State Department of Financial Services to try to speed up the Bitlicense application process and identify regulatory requirements that can be made more business-friendly.”
Action by the Albany state legislature is required to make major changes to the BitLicense regime.
Oney found that one approach that has worked well elsewhere is to put in place regulatory sandboxes to encourage financial innovation. He commented on Cointelegraph:
“Other jurisdictions have been very successful in driving innovation through sandboxing, such as the FCA in the UK, where early-stage technology companies can speak directly to institutions, run in their sandbox and test and validate the applicability of solutions in the real world.”
While creating a fintech sandbox in New York City certainly requires the collaboration of multiple city authorities, it is reasonable to expect a mayor to lead such an effort.
Finally, there is a full arsenal of tools belonging to the public domain. From raising awareness of the benefits and opportunities of blockchain technology and digital assets, such as appointing a deputy mayor with a focus on strategically promoting fintech-related initiatives, the role of the executive branch of the New York City government offers a lot of leeway in addressing the audience of over 8 million potential crypto allies.