Kill the BitLicense

Read the full article by Alex Adelman and Aubrey Strobel here

The state’s regulatory regime has been bad for New York and bad for crypto.

Key Points:

• On Monday, New York’s Attorney General Letitia James announced an order that two crypto lending platforms unregistered with the state cease operations in the state. The companies – their names redacted in a letter published by the James’ office – were ordered to cease all business activities in the state within 10 days.

• The announcement calls attention to an austere regulatory framework that has made New York one of the most crypto-hostile states in the nation.

  Alex Adelman is CEO and Aubrey Strobel is director of communications of New York-based bitcoin rewards app Lolli. This op-ed is part of CoinDesk’s Policy Week, a forum for discussing how regulators are reckoning with crypto (and vice versa).

• It is no secret decentralization is disrupting the way industries ranging from art to payments operate. States across the U.S. like Wyoming and Florida have moved to entice crypto companies to their borders. Meanwhile, New York, generally regarded as the financial capital of the world, has clung to regulations that make it immensely difficult for crypto companies, especially smaller startups, to operate in the state.

• The state has doubled down on a regulatory framework that stifles innovation and prevents crypto startups from growing their operations in one of the world’s premier financial hubs. While New York City has become a buzzing center for the crypto community, the state’s regulatory framework is lethal for most crypto startups.

• The pillar of New York’s regulatory approach to crypto is its BitLicense. New York’s BitLicense applies to a wide range of crypto organizations, including those transmitting crypto, buying and selling cryptocurrency as a customer business, providing exchange services to customers and issuing cryptocurrency.

• The BitLicense negatively affects both companies and consumers in New York. New York state residents have dramatically limited trading options in crypto. They can only buy and sell coins from money transmitters registered in the state – of the hundreds of organizations offering services in the sector, only 20 have been issued BitLicenses in the last six years. No other state similarly curtails consumer trading options in crypto.

• The stated purpose of the BitLicense upon its approval in 2015 by the state’s Department of Financial Services (NYDFS) was to protect consumers and guard against illicit activities like money laundering. However, the BitLicense has gone well beyond ensnaring ne’er-do-wells in crypto.

• entrepreneurs and financiers in the city to create never-before-seen kinds of products using blockchain technology. The growth of the sector needs to be cultivated thoughtfully, with policies aimed at helping well-intentioned startups already struggling in a competitive industry to grow – the BitLicense isn’t helping.

  As other cities and states vie to become the crypto capitals of the world, New York could easily capture this flag, but only if it acts to cultivate innovation rather than destroy it. It’s time for New York to end the BitLicense before it’s too late.