Bitcoin billionaires, Cameron and Tyler Winklevoss are among the largest contributors to NY Governor Andrew Cuomo’s election campaign. According to the New York Post, the latest campaign filings have been released to the public and on April 24, the twins each donated $50,000 to the campaign, for a total of $100,000. On May 14, just three weeks later, Gemini Trust Company was awarded a BitLicense to trade Zcash in New York State. Shortly after the Department of Financial Services approved the license, the twins donated a combined $30,000 to the re-election campaign on June 20, bringing their total to $130,000 for Governor Cuomo, comprising the majority of their $140,900 in donations to New York candidates.
At the time the BitLicense was awarded to Gemini, Tyler Winklevoss, CEO of the firm said, “We are proud be the first licensed exchange in the world to offer Zcash trading and custody services and look forward to providing customers with a safe, secure, and regulated place to buy, sell, and store Zcash, an incredible new form of digital cash.”
The approval was pushed through by Maria T. Vullo, Financial Services Superintendent of New York. She said, “This action continues New York’s longstanding commitment to innovation and leadership in the global marketplace. With smart and thorough regulatory oversight, the development and long-term growth of the industry will remain thriving.”
BitLicense requirements were first enforced in New York State in 2015. At that time, a dozen cryptocurrency exchanges and other blockchain companies left the state, moving to more crypto-friendly jurisdictions outside of New York. Many of these companies further blocked New York IP addresses in order to comply with the strict regulatory environment. The license itself has a sticker price of $5,000, and it is estimated that compliance requires another $100,000 in legal costs. Because of this barrier to entry, most blockchain startups have chosen to open up shop in other states, while only the largest companies, such as Gemini and Coinbase chose to pay to play in the state.
Although BitLicense has substantial requirements for compliance, Gemini was approved just three weeks after their initial donation to Governor Cuomo. Still, all parties have denied any quid pro quo. Cuomo spokesperson, Abbey Fashouer said, “No contribution of any size influences any government action.”
Cuomo’s challengers would disagree. Sex and the City star, Cynthia Nixon primaried Cuomo on the Democratic ticket and has accused him of corruption on several occasions, with her latest call-to-action being the return of thousands of dollars in campaign contributions to donors convicted in the Buffalo Billion bid-rigging case, where jobs were awarded using state funds to revitalize upstate New York. Among others, Alain Kaloyeros, formerly part of the Cuomo administration, was convicted on one count of conspiracy and two counts of wire fraud. Marc Molinaro, the Republican challenger also painted a picture of corruption, stating that Governor Cuomo “sells government and access to it in exchange for political donations” and that “The truth is that for seven years this governor has emboldened a culture of corruption and allowed a pay-to-play scheme to corrode all aspects of state government, infecting even his own office.” While multiple candidates have called out Cuomo on his alleged corruption, only the Libertarian candidate for governor, Larry Sharpe has pledged to eliminate BitLicense as part of his plan to drive business back to New York State. In his recent keynote speech at the Blockchain World Conference in Atlantic City, Sharpe said that he would replace BitLicense with a set of standards to attract blockchain startups and other companies back to New York state. He would also simplify taxes, stating that rules about the trading of cryptocurrencies should be no different than those applied to the trading of comic books. Sharpe believes that New York’s role as a global leader in finance will set the trend for the rest of the US. He stated, “If it changes in New York, it can change everywhere else.”
While it is unclear whether there was a direct exchange of campaign contributions for licensure in New York, the very fact that BitLicense exists is what creates an environment for corruption. By eliminating the license and replacing it with recommended standards and a stamp of approval for compliance, start-ups would once again be able to afford to do business, and politicians would have no incentive to play unfairly. It should also be noted that the Winklevoss twins are not on trial here. They have acted according to the system that is in place, and it can be argued that they had no choice but to use every legal tool at their disposal if they wanted a shot at doing business in New York.