No doubt, new regulations can cause backlogs, inefficiencies and stalling. This may be the case for New York bitcoin regulation and exchange.
In June 2015, Benjamin Lawsky was heading up New York’s Department of Financial Services (DFS), when it developed rules for virtual currency firms by mandating that they get a “BitLicense” for holding customer funds and exchanging between currencies and bitcoin. The BitLicense launched after the collapse of Mt. Gox, the Tokyo-based exchange which lost nearly $560 million worth of bitcoin. Lawsky’s plan was to have New York become a global hub for innovation, specifically bitcoin, with its market now worth more than $10.7 billion. He was considered someone taking a risk ahead of other states.
The appeal of New York’s BitLicense? To offer a clear legal framework. However, more recently, this is driving some companies away. Just to file for the license costs $5,000, and after that, the application can run up to 500 pages and includes extensive background on the business, its leaders and even their fingerprints.
On top of all that, soon after the regulations officially came into play, Lawsky departed the agency, along with some senior staff members familiar with the bitcoin plan. The licensing process went into a slowdown, which has allowed rival states and their affiliated agencies to take a chance at catching up.
Having a BitLicense relays the feeling of a verified company for consumers who may have been concerned previously. However, experts say the New York bitcoin regulations, plus the staff leaving, have resulted in a backlog without much movement.
According to the agency, after Lawsky’s exit, 15 BitLicense applications are still pending, with an additional four withdrawn and four denied.
As for the states that are gaining some footing here as New York slows: Washington has issued seven licenses to virtual currency companies since 2013, while North Carolina has licensed two.
While bitcoin-related businesses can still do business without the BitLicense, it does create some complications. Some companies say the filing and effort are not worth it.
Maria Vullo, who took over as superintendent in June 2016, said the agency is seeking to streamline the application backlog.