What can Eric Adams do? The limits of New York's transformation into a crypto hub

Despite his current tenure as head of New York City government starting in a month and a half, Eric Adams, the city’s elected mayor, has ...

Despite his current tenure as head of New York City government starting in a month and a half, Eric Adams, the city’s elected mayor, has already started ruling through advertising. Making the city of Empire more commercial and user-friendly is a centerpiece of Adams’ vocally projected agenda, and – to the delight of the crypto community – the new mayor has repeatedly declared his support for all that. concerns Bitcoin (BTC).

In the days following his victory on November 2, Adams, the former Brooklyn Borough president and former police officer, released a string of crypto-friendly statements ranging from an engagement to take your first three paychecks in Bitcoin to suggest that digital finance courses be integrated into the school program.

The mayor’s office, however, is just one of many power centers that have a say in setting the rules of the financial sector – and not the most influential. The regulatory power that currently exists in New York State makes it one of the most difficult jurisdictions in the United States for crypto companies to navigate. So what power does the mayor of New York have to bring about real change?

New York State Crypto Regulations

Getting a top city official who is quite into cryptocurrency is a welcome development for one of the world’s major financial centers. New York is considered one of the most difficult jurisdictions in the United States to conduct business involving digital assets, as Cointelegraph Gary DeWaal, president of financial markets and regulatory practice at the firm of ‘Katten lawyers.

The main cause of this difficulty, DeWaal says, is New York’s BitLicense regime which requires entities carrying out a wide range of crypto-related activities involving New York State or its residents to obtain a specialized license from the Department of Services. New York State financiers. .

These activities include receiving digital currency for transmission or transmission; store, hold or maintain crypto on behalf of third parties; buy and sell cryptocurrencies or perform exchange services as a corporate client; and control, administer or issue digital currency.

Konstantin Boyko-Romanovsky, CEO of blockchain company Allnodes, noted to Cointelegraph that a BitLicense is not required for mining activities, nor for companies that offer their services and products in exchange for cryptocurrencies. He added: “It’s a start, but it’s a narrow niche and it needs to be widened.”

Bo Oney, compliance officer at ATM provider Bitcoin Coinsource – one of the first companies to receive a BitLicense in New York State – said the goal of these regulations has always been to protect consumers , keep bad actors at bay, and establish operational and accountability requirements for cryptocurrency companies. Yet Oney admitted that the administration of these rules is often far from transparent:

“It is certainly true that the time and delays in receiving a BitLicense can be frustrating. Streamlining the application process and improving connection times with NYDFS should be top priorities for improvement. “

Side effects of BitLicense

Last week, community-driven crypto project CityCoins launched NewYorkCityCoin (NYCCoin) – a digital asset that allows users to fill city coffers by mining it, while also earning rewards through the Stacks protocol and its token. Native STX. Although CityCoins did not officially partner with New York City for the initiative, Adams did enthusiastically welcomed the arrival of NYCCoin.

Still, there is a catch. There is no legal way for New Yorkers to mine the coin designed to support their city.

Cointelegraph senior editor Jonathan DeYoung, a New Yorker who recently wrote a crypto guide to New York for Cointelegraph Magazine – noted that as a resident of New York State, he has no way of buying STX, as it is not available on any exchange that holds a BitLicense:

“STX is required to mine NYCCoin which means that I effectively cannot mine NYCCoin although I live in New York. Sure, one could use a VPN and buy it through a non-KYC platform like Binance, but it’s terribly ironic that the average New York resident is prohibited from mining their own city’s coin.

While in the short term this contradiction can be overcome by a BitLicense-holding exchange like Coinbase adding support for the token, in a more general scheme, this suggests that the existing regulatory regime could cut New Yorkers off from significant parts. of digital assets. Infrastructure.

Unfriendly application

Another source of concern for crypto companies looking to provide services to New York residents is the New York State Attorney General’s office. Letitia James – the outgoing attorney general who has announced her intention to run for governor next year – has a history of pursue severe coercive measures against players in the crypto industry and issue many warnings of the dangers of cryptocurrency trading.

In fact, NYAG had exercised increased control over digital asset companies even before James took office in early 2019. Katten’s DeWaal commented to Cointelegraph:

“The New York Attorney General’s release of his September 2018 report on the Virtual Markets Integrity Initiative which identified name-specific crypto platforms and their adherence to certain best or allegedly problematic practices – after that some relevant information was provided voluntarily by the platforms – was not helpful. in promoting New York as a blockchain-friendly place.

This approach, DeWaal argued, is best described as public denunciation and disgrace rather than “the eradication of bad apples through due legal process.”

What can be done?

Introducing changes to the BitLicense regime that would allow more companies to rise above the compliance bar and streamline the approval process could be a major step in making New York City a more welcoming crypto destination. This, however, is not in Adams’ hands, as DeWaal put it:

“Ultimately, it will be up to the New York State Department of Financial Services to try to speed up the Bitlicense license application process as well as determine what legal requirements could be interpreted in a more user-friendly manner. companies. “

Making more radical changes to the BitLicense regime would require action from the Albany state legislature.

Oney observed that one approach that has worked well in other places is to establish regulatory sandboxes to drive financial innovation. He commented to Cointelegraph:

“Other jurisdictions have been very successful in driving innovation through sandboxes, such as the FCA in the UK, where tech start-ups can interact directly with major institutions within their sandbox and test and verify the applicability of the solutions in practice. “

While creating a fintech sandbox in New York would certainly require cooperation between several city agencies, it’s reasonable to expect a mayor to spearhead such an effort.

Finally, there is a full arsenal of tools that belong to the field of advertising. From raising awareness of the benefits and opportunities of blockchain technology and digital assets to, for example, the appointment of a deputy mayor with a focus on the strategic promotion of fintech-related initiatives, the role of New York City’s executive branch of government offers great leeway to cope with a formidable audience of over 8 million potential crypto allies.