On August 8, 2015, the administration under Andrew Cuomo enacted BitLicense in New York State, as it joined other regulators in the war on cryptocurrency. Due to extremely high legal costs and ongoing requirements to remain compliant, over a dozen cryptocurrency startups left New York State at the time, and were forced to block users in the state from using their websites. Two years later, the same administration has called for a Cryptocurrency Task Force to explore the benefits of blockchain technology, while proposing ways to regulate it and to bring it back to New York.
The reason behind establishing such a task force is clear: cryptocurrencies and blockchain are growing at a phenomenal rate, and it’s clear that this technology is not going away anytime soon. Previously, regulators in New York took a tough stance on crypto; businesses that couldn’t afford to comply with overbearing regulations did not deserve to do business in the state. That is not to say that their decisions did not come from a place of altruism; it’s quite the contrary. The state wanted to protect people from their own decisions so much, that they enacted overly protective laws that did nothing but hurt the economy of the state. In a recent interview with NY gubernatorial candidate, Larry Sharpe stated, “trade in whatever they value, whether that is money, currency, bitcoin, labor, or even comic books.” By this logic, assuming that the one requirement for cryptocurrency companies were transparency, people in New York would be able to make their own decisions with their own money, based on the available information. Put simply, New York State would have been better off had it not enacted BitLicense, which had the unintended consequence of driving businesses out of state and to other areas of the country. The past cannot be undone, so the question is whether future actions can attract blockchain and cryptocurrency businesses back to the state. If it were up to Larry Sharpe, BitLicense would be repealed, removing any barriers to entry created through regulations. Under Cuomo, such a repeal is not going to happen, so it’s important to explore the idea of a Cryptocurrency Task Force to determine whether or not it will result in more companies coming back to the state, and more choices for consumers. Based on the announcement, the task force will spend the next 18 months on the following tasks:
- a review of the impact of the department of financial services’ regulations on the development of digital currency, cryptocurrency and blockchain industries in New York state;
- the number of digital currencies currently being traded and their approximate percentage of market share;
- the number of exchanges operating in New York state and their average monthly trade volume;
- the use of digital currencies’ impact on state and local tax receipts;
- the types of investment entities that are large investors in digital currency;
- the energy consumption necessary for coin mining operations and other policy considerations related thereto;
- the transparency of the digital currency marketplace and the related potential of market manipulation and other illegal activities;
- a review of laws and regulations on digital currency used by other states, the federal government, foreign countries, and foreign political and economic unions to regulate the marketplace; and
- legislative and regulatory recommendations, if any, to increase transparency and security, enhance consumer protections, and to address the long-term impact related to the use of cryptocurrency.
Anyone who follows the cryptocurrency market with some degree of regularity and knows how to use Google can answer most of these questions within a few hours, with most other answers developed within a few days. However, the State of NY will appoint a nine-person task force to this list of questions, and by the time they come up with answers in December 2019, we can expect many of the answers to change.
The development of this task force is grossly inefficient, costly and slow. It’s also several years too late, as these questions should have been answered before the Cuomo administration made decisions that had a direct, negative impact on the cryptocurrency industry. However, it is a step in the right direction, as its establishment suggests that the state legislature has recognized the importance of this industry and could potentially decide to make the environment more business-friendly sometime after 2020, and that legislators across the country have a more positive outlook than they have had in the past.