New York's Financial Regulator Is Reviewing the Controversial BitLicense

The New York Department of Financial Services (NYDFS) is revisiting how it licenses crypto startups.

AccessTimeIconOct 22, 2019 at 5:45 p.m. UTC
Updated Sep 13, 2021 at 11:36 a.m. UTC

The New York Department of Financial Services (NYDFS) is revisiting its controversial virtual currency license, the regulator's head said Tuesday.

Speaking at Georgetown University's Institute of International Economic Law during DC Fintech Week, NYDFS Superintendent Linda Lacewell said the agency was looking into the BitLicense, which requires any companies conducting cryptocurrency transactions with New York residents to be licensed to operate within the state – even if the companies are based elsewhere.

The license, considered the toughest such state regulation in the country, has long been unpopular with blockchain startups, who complain of onerous paperwork and long approval times. Kraken, an exchange headquartered in San Francisco, chose to leave New York rather than comply. The Seattle-based Bittrex exchange was forced out of New York earlier this year after failing to secure a BitLicense.

Lacewell told Georgetown's Chis Brummer:

"This is a good time to take a look, a responsible look and see how our regime is fitting the current market and ... what if any adjustments should we think about making to continue to adapt to sort of a changing industry ... that's going to be one of the things that [we do]."

But she warned the audience not to "get too excited" about what the review might result in.

Speaking to the media after her talk, Lacewell said the regulator is comparing the cryptocurrency industry when the BitLicense was first implemented in 2015 and how it has evolved since then.

"How has the industry grown? Has it matured in any way? And I don't want to get too specific, but you know, it's a good time for a second look," Lacewell said.

The current regulatory regime is "working well," and the existing regulation will be retained during this review. But Lacewell said NYDFS wants to hear from industry participants to see what improvements, if any, the agency could implement.

She cited the 22 companies which already have virtual currency licenses, adding that NYDFS continues to receive applications for the license.

Since first being introduced by previous NYDFS Superintendent Benjamin Lawsky, the state financial regulator has issued more than 20 licenses and a few trust charters, allowing exchanges, bitcoin mining firms, bitcoin teller machine startups and custodians the ability to store and transact cryptocurrencies in the Empire State. NYDFS awarded only six licenses between June 2015 and June 2018, but has since added 16 in the 20 months since.

Lacewell did not say when the regulator's review of the license would be completed, or what specifically industry participants can expect to see at the close.

"Maybe there's some things that could be within a license's discretion, maybe there could be all kinds of permutations and our mind is open," Lacewell said Tuesday, concluding:

"With any new and emerging industry, it's good to take a close look and see if there's any aspect maybe [where] there's something we need to add."

Linda Lacewell image via CoinDesk's Flickr archives


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