New York appears to be reconsidering its approach to regulation for crypto firms as its Virtual Currency License continues to be a brick wall guarding its market. Earlier this week, the New York Department of Financial Services (NYDFS) confirmed that it would consider issuing conditional licenses for allowing startups to partner with other companies that already have licenses to operate in the state.
Extending an Olive Branch
In addition to the consideration, the agency also finished drawing up guidance for coin listings from licensed companies, and publishing a document to help companies that would like to get the BitLicense. It hopes that this will help to improve the licensing process and bring back businesses that have abandoned the state.
The documentation is especially significant, as it marks what appears to be the NYDFS helping companies that would like to get regulated and register for the BitLicense. Historically, the agency hasn’t quite cared much to do so. The NYDFS launched the BitLicense in 2015, requiring any crypto-based firm that would like to operate in its market to have one. Many hailed the move at the time, claiming that the state took a more structured and progressive approach towards crypto regulation. However, it hasn’t entirely been smooth sailing too.
Currently, 18 companies have gotten BitLicense application approvals, ranging from cryptocurrency exchanges to trading companies and other crypto-based financial service providers. However, the companies that haven’t been able to get their licenses have criticized it for being deliberately challenging to work with.
Notable BitLicense Holdouts
Last year, crypto exchange Bittrex had applied for the license to set up shop in the state. However, the NYDFS rejected the appeal. In a press release, the agency pointed out that the exchange had implemented inadequate Anti-Money Laundering (AML) and Know Your Customer (KYC) security controls.
Responding to the rejection, Bittrex expressed its disappointment with the setback and added that the regulations caused more harm than good to both crypto companies and their customers. In its official response, the exchange also disagreed with the regulator’s assessment of its KYC and AML standards. Most specifically, it pointed out that it maintains a risk assessment framework that had been approved by external counsel.
Kraken, another top crypto exchange, announced that it would be ceasing operations in the state after the NYFDS launched the licensing requirement. Like Bittrex, the exchange pointed out that it wouldn’t be able to cope with the license’s requirements.
The license’s stringent requirements appear to have alienated New York state from several crypto firms’ plans. When Binance launched its U.S.-facing arm, Binance.US, last September, it refused to offer New Yorkers access to its services because of the license. To this day, the exchange hasn’t made progress with securing the approval.
In order to bring back business, the NYDFS pointed out that it had signed a Memorandum of Understanding (MoU) with the State University of New York to allow prospective licensees to experiment with their products. The university will supervise all licensees, and the initiative will reportedly help companies to engage with the department and expedite the licensing process.