NYDFS Chief Calls Industry Reaction to BitLicense Changes 'Beyond Positive

NYDFS Superintendent Linda Lacewell said she decided to review the regulator's landmark virtual currency license in light of its impending 5-year anniversary.

AccessTimeIconJul 15, 2020 at 8:01 a.m. UTC
Updated Dec 11, 2022 at 7:39 p.m. UTC
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The crypto space has reacted positively to the new changes made to the BitLicense, Linda Lacewell, superintendent of the New York Department of Financial Services (NYDFS), said Tuesday.

Discussing recent updates to the state’s contentious crypto regulatory framework as part of the Global Leaders Webinar Series sponsored by Global Digital Finance (GDF) in partnership with Global Blockchain Business Council, Lacewell said some in the space may “curse” the regulator, but the new changes have been received rather well.

“The reaction has been very positive, and beyond positive,” she said.

The session was hosted by Jeff Bandman, former fintech adviser to the U.S. Commodity Futures Trading Commission (CFTC).

Lacewell said she was not surprised by the industry’s reaction to the updates because the regulator worked on the license in confidence with industry players – both licenced and unlicenced – and experts to understand its shortcomings. 

“We've even had some licensees tell us that they're very excited and interested in pursuing additional licencing with other potential parties that are all partners in the space,” Lacewell said. 

Crypto hub?

Lacewell said when she first took office last year, she immediately assigned personnel to work through a backlog of BitLicense applications that needed reviewing and that she has made numerous application decisions since then.

For instance, it took European crypto exchange Bitstamp four years after submitting an application to receive a license. Since Lacewell was appointed in June of 2019, six entities have received NYDFS accreditation.

“But then, beyond that, the area felt a little stale. And I thought to myself, we're coming up on five years of having this licence and we need to take a fresh look,” Lacewell said. “I was very conscious of the criticisms about the licence and that it wasn't pragmatic and that it favored a select few and they had to have a lot of money to get into the space.” 

Lacewell added the department had not put out much in the way of guidance to help companies navigate the “complicated application” for the license.

“We knew that, at a bare minimum, we needed to clarify and explain the regulatory regime and the licencing application,” Lacewell said. 

Since then, her office has made a number of changes to the Bitlicense including creating a conditional license designed not to burden startups with the heavy costs of applying for a full BitLicense. Instead, they can partner with existing licensed entities to legally operate in New York. 

The regulator is also allowing licensed companies to self-certify virtual currencies, and has issued guidancehttps://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/gn/adoption_listing_vc on coin listings for licensed platforms. To encourage innovation in the space, NYDFS has entered into a partnership with the State University of New York that would allow anyone to work on innovative projects or ideas by visiting one of the 64 SUNY campuses around the state.  

During the webinar, Lacewell said she wants the industry to work.

“Look, when it first started, people said fly-by-night, crazy idea, flawed [and] worse, right? But there are responsible actors in the marketplace. Any financial service or product can be abused, misused and turned into a bad instrument,” Lacewell said. 

Finally, Lacewell said NYDFS wants innovators in emerging technologies across the board to locate in New York and flourish.

“We want innovators right here in New York, which has been the birthplace of so much invention and ingenuity, historically, and has always set the standard not just for the rest of the country but the world. That's what it means to be the birthplace of immigration, because change agents come here and we want you here,” Lacewell said. 

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