BitLicense, the New York state’s regulatory agency enforces a set of regulations on companies that provide cryptocurrency-related services to its residents. Since the establishment of this organization in 2015, only a few cryptocurrency-based businesses were granted the license to operate. The New York Department of Financial Services (NYDFS) recently approved applications for virtual currency license from a couple of firms. Consequently, cryptocurrency ATM operator, LibertyX, and stock trading service Robinhood increased the number of BitLicense holders to 16 firms.
The state monitors these companies to ensure strict adherence to the regulations. However, those that violate the compliance procedure are penalized. Three companies were indicted in a report released by the attorney general’s office in September last year. These firms were referred to the state’s financial regulator for their involvement in price manipulations on cryptocurrency exchanges.
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Many American states are trying hard to encourage cryptocurrency businesses by implementing lenient guidelines and requirements. Limitations challenging crypto-based startups are minimized in these areas. However, New York has successfully controlled cryptocurrency businesses with strict regulations than most American states. Prominent personalities in the crypto community have kicked against these stringent conditions. They reasoned that such regulations may not favor the growth of the crypto industry. Despite the policy, companies still apply for licenses to allow them to operate in the crypto sector.
Major Financial Hub In The World
The presence of great financial institutions contributed to New York becoming a major financial center. This situation as well as a consumer market of about 20 million people, benefits finance-related firms located in this jurisdiction. The legislators in Albany, New York, have long taken the advantage of this fact to control the financial hub. The founder of Weiss Research and Weiss Cryptocurrency Ratings, Martin Weiss, confirmed the long history of Albany’s implementation of strict regulations in financial markets.
Unlike many of the nation’s other states, the legislators use rigorous regulatory approach to control the world’s largest financial center. They have also succeeded with tough crypto regulations due to New York being the center of the financial system across the globe. Even the first sketch of the framework that later became BitLicense was drafted in July 2014 by the state’s Superintendent of Financial Services, Ben Lawsky. Consequently, crypto companies were forced to either comply with the regulations or quit, a year after when the agency was introduced.
Impact of Strict Crypto Regulations
The tough conditions given to crypto industry by BitLicense was not well accepted by all the affected companies. Businesses such as ShapeShift and BitFinex that cannot comply with the regulations quit the New York market. Similarly, a crypto exchange known as Kraken ceased to provide services to residents of New York. In a blog post that announced the firm’s decision, Kraken accused BitLicense of being cruel.
Besides the criticism of the tough regulations, the slow pace of approving license applications is also a concern to crypto companies. Like Genesis Global Trading, some businesses have to wait for three years before getting approval.
The strict regulations may benefit institutional and mainstream adoption. However, the requirements can restrict smaller firms that do not have enough resources to comply with the rigorous. Despite this drawback, many of the New York representatives believe that the strict regulatory approach suits the state status as the world’s financial center.
Is the standard set by BitLicense an ideal option that would help cryptocurrencies thrive? Do you think it is a good or bad thing for the industry? Share your thoughts.