New York state senators have proposed a bill that would increase regulatory oversight for cryptocurrency businesses, but the move has exposed a deep rift among key regulators. The bill, known as Senate Bill S2983B, would amend the state’s financial services law to require all businesses that handle cryptocurrencies, including exchanges and miners, to obtain a licence from the New York State Department of Financial Services (NYDFS).
While some regulators see this as a necessary measure to protect the public from fraud and money laundering, others argue that it would be an overly burdensome regulation that would stifle innovation and growth in the state’s cryptocurrency industry.
The NYDFS, which created the state’s controversial BitLicense regulatory framework in 2015, has expressed its support for the bill. The agency argues that the licensing requirement would protect consumers and prevent illicit activities, claiming that it has already issued licences to several cryptocurrency businesses operating in the state under the BitLicense framework.
However, some cryptocurrency industry insiders are concerned that the bill would impose additional regulatory costs and burdens that would be difficult to bear for small and emerging businesses. They argue that the state’s existing regulation is already too strict and that further regulation could lead to the exodus of cryptocurrency companies from New York to more crypto-friendly states.
Moreover, some have pointed out that the bill does not provide any clear guidance on how the state would determine which businesses should be licensed. The lack of clarity could lead to confusion and could be interpreted by some businesses as an invitation to operate without a licence, which would defeat the purpose of the regulation.
The rift among the state’s regulators is further highlighted by the fact that the bill has not gained the support of the New York State Department of State or the New York State Office of Information Technology Services, both of which argue that the licensing requirements would be too onerous for businesses.
The Department of State has expressed its concern that the regulation could discourage businesses from operating in the state, citing recent research from the Boston Fed that found that cryptocurrency regulation can sometimes have a negative impact on innovation and growth. The Office of Information Technology Services, meanwhile, has argued that the regulation would create unnecessary regulatory burdens and could ultimately harm consumers.
The proposed bill has also attracted criticism from some cryptocurrency advocates, who argue that the state should focus on developing a regulatory framework that promotes innovation and growth rather than on imposing strict regulatory requirements.
The bill is currently being considered by the state Senate’s committee on banks and the assembly’s committee on banks, and its future is uncertain. If the bill is passed, it would be a significant development for the cryptocurrency industry in New York and could set a precedent for other states to follow.
In conclusion, the proposed bill has exposed deep rifts among key regulators in New York state, highlighting the tensions between those who believe that strict regulation is necessary to prevent fraud and illegal activities, and those who argue that such regulation would stifle innovation and growth. The future of the bill is uncertain, but regardless of its outcome, it is clear that the cryptocurrency industry in New York will continue to face challenges and scrutiny from regulators and stakeholders.
New York Attorney General Letitia James has proposed a 25-page bill that seeks to tighten state crypto regulation. Over two dozen politicians, former regulators, and policy experts have endorsed the bill, with some hailing it as a major step forward in bringing the volatile industry to heel. However, the bill has touched off a behind-the-scenes debate as influential figures warned it would undercut the authority of the New York Department of Financial Services (DFS), which is already a leading crypto regulator in the US thanks to its BitLicense virtual currency program. The proposed legislation could lead to overlapping jurisdiction that would result in BitLicense and trust holders being subject to separate regulators.
