Bitcoin is a modern cryptocurrency that evokes mixed reactions and feelings in the traditional monetary and financial sectors. However, while the rest of the world was struggling to understand Bitcoin and its potential for disrupting the global economic landscape, New York was setting up regulations that would make the city a global hub for Bitcoin.
In fact, in 2015 New York’s Department of Financial Services (DFS) created rules that made it easy for Bitcoin to thrive and flourish in the city. One of the rules made to enable Bitcoin in the city was the requirement that all virtual currency firms in the state get a “BitLicencse”. The BitLicense was a sort of regulatory approval for them to hold customers fund and for them to provide exchange services for dollars and other currencies for virtual currencies such as Bitcoin.
New York has only issued 2 Bitcoin Licenses in Almost 2 years
Interestingly, the BitLicense can be used as a gauge of how well New York has succeeded in its bid in to become the Bitcoin Hub of the world. However, Reuters reports that New York seems to have lost its drive to champion the cause of Bitcoin; at least, based on inferences from the state’s issuance of BitLicenses.
Reuters reports that since 2015 when New York made the rules that would guide the operation of Bitcoin, the city has only issued two (2) BitLicenses. The more worrisome part is that the city has 15 pending BitLicense applications, four firms have withdrawn their applications, and four applications have been denied. One would think that New York would be crawling with firms dealing in virtual currency by now, but it appears that the city doesn’t have the momentum to stay the course of supporting Bitcoin.
However, in September, Deloitte said New York was in the third position behind London and Singapore as a fintech destination or hub. Of a truth, the fact that Bitcoin is a digital cryptocurrency that provides privacy in financial transactions has placed it in the black book for financial authorities. However, the fact that Bitcoin has many apparent advantages over fiat currencies makes it hard for financial regulators to dismiss or denounce it altogether. Hence, most financial hubs are choosing to group Bitcoin as a type of FinTech.
Why is New York losing momentum to champion Bitcoin?
One of the reasons behind New York’s lag in creating a Bitcoin hub is the exit of Benjamin Lawsky who headed the DFS last year when the rules were being created. Lawsky’s exit also led to the exodus of some key staffers who were knowledgeable about building regulatory framework for virtual currencies.
Patrick Murck, a lawyer and fellow at Harvard University’s Berkman Klein Center for Internet & Society observes that “by putting the regulations together and having key staff members leaving almost thereafter, they really put the industry behind the eight-ball in terms of competing with traditional service providers.”
The second reason New York has not been able to dominate the FinTech scene with a special emphasis on Bitcoin is that its regulatory process is cumbersome. The application fee costs a whooping $5000 and the documentation is reportedly about 500-pages long. It appears that the process for getting Bitlicenses is designed to ‘extract’ maximum information about users – a move which runs afoul to the founding principles of Bitcoin.