The New York Department of Financial Services (NYDFS) announced today it would extend the comment period for its proposed bitcoin regulations by 45 days, citing significant public interest in the rules as a key reason behind the decision.
In an exclusive interview with CoinDesk, NYDFS superintendent Benjamin M Lawsky opened up about the decision, emphasizing that he felt the extension both necessary and reasonable given his agency's need to ensure that the proposed laws, when enacted, have the desired consequences.
Lawsky told CoinDesk that the aim of the agency is to put forward the best regulation possible, adding that while the agency wants to move quickly to put in place policies, it doesn't want to do so at the risk of getting crucial elements wrong.
"We're not the kind of agency that thinks we have a monopoly on the truth and that we're always right. We feel strongly about a lot of the provisions in the proposed regulations, but we get that there might be things we can improve."
For instance, he clarified that the law is intended to relate only to financial intermediaries and financial service providers, not software providers as widely interpreted.
He confirmed the NYDFS aims to put out a revised proposal by the end of October, and that following any material changes in the law, an additional 30-day comment period would allow the industry more time to influence the final rules.
"I think the sooner we get the regulatory framework out there, I think ultimately the better, but we don't need to move so fast that we risk getting something wrong," he added.
Though the NYDFS said that letters from US companies and citizens had an influence on the decision in the formal release, Lawsky acknowledged to CoinDesk that the broader global effects of the proposal were also a motivating factor.
Noting this global influence, Lawsky said:
"I think that gives us an additional responsibility to do our very best to get it right, and the best way to get something right is to try and get as many viewpoints as you can when you put a complicated regulatory framework, consider them carefully and make the best decisions possible."
The response is notable given a recent comment filed by China's three largest bitcoin exchanges BTC China, Huobi and OKCoin, which alleged the language of the laws would require them to perform enhanced due diligence on non-US customers.
Lawsky also commented on the reaction from the digital currency community, which, while initially positive about the regulation, has been more vocal in recent weeks about its more restrictive aspects. For example, Circle CEO Jeremy Allaire went so far as to suggest his company would refrain from serving New York customers should the laws pass in current form, a viewpoint echoed by other prominent business leaders.
Noting that he wasn't surprised by the reaction, Lawsky remarked:
"I think the most surprising thing has been that certain provisions in the regulation that I think when we drafted it initially that we thought would be pretty clear in terms of the breadth, were read by some much more broadly than we intended."
Still, he praised the responses the NYDFS has so far received, noting that he has been impressed by the number of companies and individuals that take the industry seriously and care about its underlying technology.
Specifically, Lawsky suggested that he was surprised that the digital currency industry's software providers had implied that the law was meant to govern their actions.
Responding to this popular critique of the law, Lawsky told CoinDesk:
"We saw fairly quickly that certain provisions were being read by software developers as potentially applying to them, and that could stifle [their] development."
For example, he noted that the NYDFS does not intended to seek approval for every piece of code created by these companies, though he acknowledges that the original wording may have suggested such an interpretation.
He added that this initial unintended reading could prove beneficial, however, ultimately enhancing the agency's ability to better communicate its desired policies.
"I think accompanying the revisions, we'll do some kind of guidance so people have more clarity as to the breadth of the regs, so software developers aren't going to have to be sitting around wondering if it applies to them – it doesn't, it applies to financial intermediaries," Lawsky said.
Further extensions unlikely
Throughout the interview, Lawsky stressed that the NYDFS still wants to move quickly to implement its laws for the bitcoin sector, and that he believes an additional 45 days will allow his agency to address the community's concerns.
"We've already gotten extensive and very good comments, and the first 45 days haven't even run fully," Lawsky said. "So, I think an additional 45 days should get us to where we're comfortable and that we've given people enough time to think about the regulation and the provisions they care about and give us comment."
Still, Lawsky added that he doesn't want to close the door to a further extension completely, saying:
"I don't right now, but never say never."
Bitcoin's future bright in New York
Despite the community's sometimes negative outlook on the regulation, Lawsky was also optimistic that his agency can establish nuanced and thoughtful rules that don't stifle innovation.
He indicated that his team is already working through comments with an eye for updating the document, noting that some changes now obviously need to be made. Other revisions, he added, are likely to take time and high-level meetings to assess.
Finally, he welcomed additional comments on the proposal and encouraged the community to continue to inform the NYDFS on how it can create a framework that is in both the interest of the state and the community.
"If we get that right, I think the outlook for virtual currencies in one form or another is quite bright in New York, but we'll have to take it one day at a time."
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