New York Legislator Proposes BitLicense Alternative for Cryptocurrency Users
New York State Assembly legislator Ron Kim (D-40) has unveiled a bill that intends to protect cryptocurrency investors and ease the bureaucratic burden on crypto-related businesses. It’s the first comprehensive cryptocurrency bill in New York to make it past studies and commissions and into the hands of the legislative branch. Kim introduced the legislation on March 13, 2018, after he met with blockchain industry leaders on the subject.
Known as The New York Cryptocurrency Exchange Act (A9899), the bill relates to “the audit of cryptocurrency business activity by third party depositories and prohibits licensing fees to conduct such cryptocurrency business activity.”
If it were to take effect, the legislation would make amendments to Section 9 of New York’s Banking Law. With the addition of section 9-x, the law would mandate that any cryptocurrency business or entity be subject to routine audits by a public or third-party depository service. These audits would require that individuals and businesses alike safeguard assets with proper security measures, provide adequate insurance for account holder assets and produce proof-of-asset ownership.
Any entity in full compliance will receive a digital New York Seal of Approval to reassure consumers that the outlet is trustworthy and secure. This seal would ideally replace the BitLicenses currently issued by the New York State Department of Financial Services, doing away with this fee-based license in favor of one earned by audit.
Kim believes that earlier efforts to regulate the space have put enormous burdens on businesses trying to grow and operate in the cryptocurrency space. “What New York needs now,” he told Bitcoin Magazine, “are common-sense laws and security procedures to provide a degree of clarity for both businesses and the public. This legislation will give consumers and companies the confidence needed for widespread adoption of cryptocurrency in New York.”
While the bill is the first of its kind for New York legislators, this isn’t Kim’s first foray into cryptocurrency. As a precursor to the landmark legislation, Kim recently published a brief report titled “The Future of Bitcoin in NY.” His research identifies unregulated exchanges as “the weak point” in the blockchain ecosystem. This vulnerability, coupled with the cost of a BitLicense, has left New York lacking in legitimate crypto-companies and consumer confidence.
According to a statement from Kim’s office, there are currently fewer than 10 BitLicense holders in the entire state of New York, even though there are some 1,000 active job postings in New York for the blockchain industry. It’s Kim’s hope that the new legislation will foster a friendlier environment for companies in the space; one that will attract more business and generate increased revenue by connecting consumers with reliable, state-vetted entities.
Throughout 2017, the United States government remained relatively quiet on the subject of cryptocurrencies and blockchain. While other countries are beginning to outline clear regulations and legislative guidelines, U.S. investors have had their ears filled with conflicting talk from the SEC, the CFTC and various state legislatures.
So far, however, it’s been a busy year for the United State’s regulatory efforts, both on federal and state levels, and The New York Cryptocurrency Exchange Act is yet another installment in a growing series of litigation that finally broaches the topic of cryptocurrency regulations. If anything, the legislation may set a precedent for consumer protections in the industry, as well as a more lenient regulatory approach that might encourage job growth in the industry.