New York is somewhat notorious in the cryptocurrency world. Where other states have adopted the occasional tangential legislation, New York is well into their second round of regulatory laws. While this environment is potentially oppressive, it at least shows a willingness to address some of the systematic problems that have plagued the blockchain industry. The persistent volatility that affects the cryptocurrency market would almost certainly benefit from well-crafted regulations. It remains to be seen if the regulations put in place by New York qualify as well-crafted.
Their first program is the BitLicense certification that allows cryptocurrency exchanges to operate within New York State. These BitLicenses strictly regulate exchanges in line with other industries that operate in New York. The announcement of the program resulted in at least 10 Bitcoin related companies leaving New York entirely. Unfortunately, in the nearly three years since the BitLicense became available, only three companies have successfully received permission to operate in New York. These three are Circle, Ripple and Coinbase – all well-known entities with strict self-regulation already in place.
The Virtual Markets Integrity Initiative
The next step in New York’s continuing mission to understand and better regulate the cryptocurrency sphere lay in the Virtual Markets Integrity Initiative. Not yet backed by legislation, the VMII is an inquiry into the operating methods of some of the top cryptocurrency exchanges. Kraken, Coinbase, Gemini and a slew of other exchanges received letters from the NY Attorney General, Eric Schneiderman.
In these letters, he requested some relatively in-depth information. On the list was ownership, policies and security – all items that it would benefit the public to know. However, there is also no reason that the exchanges would have to provide this information as most do not operate in New York. The query is also inherently invasive and some of the exchanges have responded negatively.
Response from Cryptocurrency Exchanges
The highest profile refusal came from the Kraken exchange. When faced with the query letter, Kraken’s CEO, Jesse Powell, responded quickly and concisely. While clearly stating that his willingness to help government officials understand cryptocurrency technology, he also pointed out the intense entitlement that the letter represents. Kraken was one of the companies that abandoned New York in 2015 when the BitLicense emerged, and to Powell, this was only another confirmation that he made the correct decision. Other exchanges were less hostile to the initiative, with Gemini, Bittrex, Circle, Bitfinex and itBit expressing their support for a better regulatory framework.
Article By: Adam Stone