New York's proposed BitLicense regulations were not designed to cover second-generation projects and other 'crypto 2.0' blockchain technologies, according to answers from Department of Financial Services (NYDFS) superintendent Benjamin Lawsky.
Work is being done in this area, Lawsky said.
Crypto 2.0 question
This raises questions over whether other forms of value and information transfer not directly emulating that of 'currency' as we know it could, or even should, be regulated in the manner of today's financial products, according to a senior financial industry adviser on compliance issues.
Angus Champion de Crespigny, a New York-based anti-money laundering (AML) expert and senior manager in regulatory compliance technology at a global consulting firm, asked Lawsky for some clarification on the issue at New York's Cardozo School of Law a couple of weeks ago.
The regulation was not intended to capture or halt businesses working in that area, Lawsky replied. He acknowledged that small amounts of "currency" may be transmitted along with non-currency value like information and asset transfers on some crypto 2.0 platforms, but appeared to regard such amounts as insignificant and said the NYDFS was "still working out how to address that".
Lawsky's level of technical knowledge appeared impressive, Champion de Crespigny said, and it appeared the NYDFS had done a lot of research into the emerging blockchain technologies and understanding how they work.
No other official or body has yet produced an effective solution on how to regulate these new kinds of instruments, he added, writing:
Value could soon be transmitted in many different forms, he said, adding that regulators could struggle to keep up. Financial regulation in the past has been "product based", and far lighter regulation or monitoring may be more appropriate from here on.
Defining crypto industry
Champion de Crespigny's role involves advising on financial regulatory issues, AML and even bitcoin and other digital currencies.
He became interested in emerging blockchain technologies through his own background as a software engineer and 'white hat' hacker. He also set up his firm's cross-competency Digital Finance task force, which is tasked with researching the potential of blockchain and other new consensus technologies.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.