The City’s Blockchain Task Force is trying to create the world’s most innovative financial center, but they might need help from a few friends. With so many new millionaires and billionaires in town—and more on the way with Bitcoin’s meteoric rise—the city could be primed for crypto-mania.
There are many benefits of New York City becoming a crypto hub, but the city’s inefficiency and logistical hurdles make it difficult for blockchain companies to thrive there.The “future of cryptocurrency 2021” is a question that many people ask. The answer to this question is not yet known, but it seems like New York City will be the crypto hub in the future.
Despite the fact that his real tenure as mayor of New York City begins in 1.5 months, Eric Adams, the city’s mayor-elect, has already begun ruling by publicity. Adams’ openly declared agenda includes making Empire City more business and tech-friendly, and — to to the crypto community’s joy — the future mayor has made it a point to constantly announce his support for all things Bitcoin (BTC).
Adams, a former Brooklyn borough president and police officer, issued a string of crypto-friendly statements in the days following his Nov. 2 victory, ranging from a pledge to take his first three paychecks in Bitcoin to suggesting that digital finance courses be incorporated into school’s curriculum.
The mayor’s office, on the other hand, is only one of numerous power centers that have a role in determining the regulations that govern the financial sector – and it isn’t the most powerful. The state of New York’s present regulatory authority makes it one of the most difficult US jurisdictions for crypto firms to navigate. So, what authority does the mayor of New York City have to effect genuine change?
The current situation of crypto regulation in New York
Having a high-ranking local official on board with cryptocurrencies is a positive move for one of the world’s most important financial hubs. According to Gary DeWaal, head of Katten’s financial markets and regulatory practice, New York is one of the most difficult states in the United States to do business utilizing digital assets.
The primary cause of this difficulty, according to DeWaal, is New York’s BitLicense regime, which requires entities conducting a wide range of crypto-related activities involving the state of New York or its residents to obtain a specialized license from the New York State Department of Financial Services.
Receiving or sending digital currency; keeping, retaining, or maintaining custody of crypto on behalf of others; buying and selling crypto or conducting exchange services as a client company; and managing, administering, or issuing a digital currency are examples of such operations.
A BitLicense is not necessary for mining operations or firms that sell their services and goods in return for cryptocurrency, according to Konstantin Boyko-Romanovsky, CEO of blockchain startup Allnodes. “That’s a start,” he said, “but it’s a little niche that has to be expanded.”
The goal of these regulations has always been to protect consumers, keep bad actors at bay, and establish operational and responsibility requirements for cryptocurrency companies, according to Bo Oney, head of compliance at Bitcoin ATM provider Coinsource — one of the first companies to receive a BitLicense in the state of New York. Even still, Oney stated that the implementation of these regulations isn’t always smooth:
“It’s true that the time and difficulties associated with acquiring a BitLicense may be aggravating. Streamlining the application process and shortening the time it takes to hear back from NYDFS should be major goals.”
Consequences of BitLicense
NewYorkCityCoin (NYCCoin) is a digital asset that allows users to replenish the city’s coffers by mining it, all while receiving incentives using the Stacks protocol and its native STX token, which was released last week by community-focused crypto project CityCoins. Despite the fact that CityCoins has not yet officially collaborated with New York City on the project, Adams has eagerly welcomed the introduction of NYCCoin.
However, there is a snag. New Yorkers are unable to mine the currency created to sustain their city in a lawful manner.
Jonathan DeYoung, Cointelegraph’s senior copy editor and a New Yorker who just authored a crypto guide to NYC for Cointelegraph Magazine, pointed out that as a New York state citizen, he has no way of buying STX since it is not accessible on any exchange that has a BitLicense:
“Because STX is necessary to mine NYCCoin, I am virtually unable to mine NYCCoin while residing in New York.” Of course, one could utilize a VPN and buy it on a non-KYC exchange like Binance, but it’s amusing that the typical New Yorker would be barred from mining their own city’s currency.”
While this paradox may be resolved in the short term by a BitLicense-holding exchange like Coinbase providing support for the token, in the long run, it implies that the current regulatory framework is shutting New Yorkers off from important components of the digital asset infrastructure.
Unfavorable enforcement
The Office of the New York State Attorney General is another cause of worry for crypto businesses wishing to provide services to New York people. Letitia James, the current attorney general who has stated her desire to run for governor next year, has a track record of taking tough enforcement action against crypto sector actors and providing several warnings about the risks of cryptocurrency trading.
Even before James assumed office in early 2019, the NYAG had been increasing its investigation of digital-asset enterprises. DeWaal of Katten remarked to Cointelegraph:
“The New York Attorney General’s September 2018 Virtual Markets Integrity Initiative report, which named specific crypto platforms and their adherence to certain best or alleged problematic practices — after certain relevant information was volunteered by the platforms — was not helpful in promoting New York as a blockchain-technology friendly locale,” says the report.
This method, according to DeWaal, is more akin to “public identifying and shaming” than to “eradicating bad apples via due process of law.”
What options do we have?
Changing the BitLicense framework to enable more companies to cross the compliance hurdle and shorten the licensing process might be a big step toward making New York a more hospitable crypto location. As DeWaal pointed out, this is beyond of Adams’ control:
“Ultimately, the New York State Department of Financial Services will be responsible for attempting to speed up the Bitlicense application process as well as determining legislative standards that may be construed in a more business-friendly way.”
The state legislature in Albany would have to act to make more significant modifications to the BitLicense framework.
Establishing regulatory sandboxes to foster financial innovation, according to Oney, is one way that has worked effectively in other areas. In an interview with Cointelegraph, he said:
“Other jurisdictions, including as the FCA in the United Kingdom, have had great success in encouraging innovation via sandboxes, where early-stage digital businesses may interact directly with major institutions inside their sandbox and test and validate the application of ideas in practice.”
While establishing a fintech sandbox in New York Local would undoubtedly need collaboration among many city departments, it is realistic to expect the mayor to lead the charge.
Finally, there is a vast array of instruments available in the field of public relations. The role of the New York City government’s executive branch provides wide latitude in addressing a formidable audience of over 8 million potential crypto allies, from raising awareness of the benefits and opportunities of blockchain technology and digital assets to, say, appointing a deputy mayor with a focus on strategically promoting fintech-related initiatives.
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