New York state has some of the most stringent regulations in the country for companies wanting to trade cryptocurrencies. Depending on who you ask, the BitLicense – the license granted by the state Department of Financial Services to only 29 cryptocurrency companies currently – is either overly restrictive or a necessary check on volatile currencies that still raise many unanswered questions.
But cryptocurrency companies and those who want to see the application of blockchain technology expand are hopeful that the incoming Eric Adams mayoral administration is just the start of New York officials taking a more open minded approach to the world of virtual currency. Adams has positioned himself as a champion of the industry, promising to not only encourage the growth of the sector in New York but to take his first three paychecks as mayor in bitcoin. (He later clarified that he would convert his first three checks to bitcoin, as the city only cuts checks in U.S. dollars.)
At an event on Friday hosted by City & State and sponsored by eToro, several industry leaders discussed what New York has to gain from a growing virtual currency sector, and how lawmakers and regulatory agencies can help foster its growth. “If you’re not entering this space, you are essentially deciding that you are exiting the future of where financial services go,” said Lule Demmissie, chief executive officer of eToro USA, a cryptocurrency exchange. “I feel really passionately about the fact that we need to make the case to New York why this is such an important technology, why it can be good both for our tax base, for our people, and for the expansion of the availability of capital and investing for people, for regular people.”
Several panelists suggested that overzealous regulations could keep New York seeing tax revenue and employment opportunities from the growing industry. “It’s an opportunity certainly for New York to capture a larger share of the pie by building crypto-friendly regulations and trying to work with a bunch of businesses,” said Michael Moro, the chief executive officer of Genesis, a cryptocurrency prime brokerage. Others suggested that cryptocurrency provides more equitable access to capital and investment opportunities. “If you’re for immigrants not being gouged for remittances, you have to explore cryptocurrency,” Demmissie said.
Adams has appeared as a cheerleader for the industry. “We have a mayor coming into office who is very excited about the potential of this technology to democratize the mechanisms of our society and fundamentally change the way power is distributed – financial power and social power,” said Andrew Rasiej, the founder of Civic Hall and a co-leader of the technology committee on Adams’ transition team. “Some of you may have heard that there's some discussion about (creating) a deputy mayor for technology for New York. Well, we're going to have for the first time a mayor for technology in New York,” Rasiej added, referring to Adams’ interest in tech.
But while New York City may be getting a crypto-friendly leader in Adams – someone who can encourage companies to set up shop here and possibly set up a municipal digital wallet – the mayor has little authority on regulatory questions. The industry faces challenges in evangelizing the benefits of virtual currency – or even just blockchain – to lawmakers.
State Sen. Diane Savino, who chairs the Senate’s Committee on Internet and Technology, is the first to acknowledge that tech sometimes goes over lawmakers’ heads. “I’ve had some interesting conversations with my colleagues about what bitcoins are. Some of them think they’re actual, tangible tokens,” said Savino, who delivered the keynote address on Friday. “I’m not even joking about that.” Savino suggested that industry leaders looking to make the case for a wider embrace of cryptocurrency should figure out how to distill their pitch and explanation of the technology into five sentences – what she estimated was the average legislator’s attention span.
Still, speakers at Friday’s event pointed to Gov. Kathy Hochul’s nomination of Adrienne Harris to lead the state Department of Financial Services as a reason to be hopeful about finding open ears in state government. A former Obama administration official, Harris serves on the board of a financial technology company. Some lawmakers have criticized the pick because of Harris’ fintech ties, with state Sen. Jabari Brisport saying in September, “appointing Adrienne Harris to oversee the Department of Financial Services would be akin to giving predatory financial tech companies free rein in New York.”
Savino said Friday that Harris should be confirmed by the state Senate. “There are people every day advocating that we reject her nomination,” Savino said. “You know why? Because she had the audacity to say something positive about financial technology. Because for some reason, most of my colleagues think that fintech is bad. I don't know why, they don't know why.”
Currently, the state is also considering the environmental effects of a common type of mining for cryptocurrency referred to as proof-of-work. The practice consumes massive amounts of energy, and environmental advocates want the state to ban proof-of-work mining in favor of alternatives. Concerns about the negative environmental effects of this type of mining were raised at Friday’s event. In response to an audience question about the risks of proof-of-work mining, Demmissie said that those concerns need to be addressed but panelists didn’t elaborate on whether the state should take action to regulate mining.