Bitcoin Boom?
State rules block Adams’ aspirations for NYC
IT made for reliable headlines: Eric Adams tweeted that he wanted his first three paychecks as mayor paid in bitcoin. In the same tweet, Adams declared, “NYC is going to be the center of the cryptocurrency industry and other fast-growing, innovative industries! Just wait!”
With all possible respect to the mayor-elect, his statement made many of us in the field chuckle. Unfortunately, New York ranks among the country’s least hospitable venues for bitcoin and cryptocurrency innovation — indeed, “just wait” is what we’ve been doing for years.
Before we can operate in New York, companies that work in this space are forced to navigate byzantine state rules and regulations — including obtaining what’s known as a “BitLicense.” The BitLicense demands that a company furnish extensive financial disclosures and demonstrate compliance with countless cybersecurity and anti-money laundering rules, complete with audits. Firms must also meet among the highest capital requirements in the country.
All that has deterred cryptocurrency and bitcoin innovation in New York. Obtaining the license can cost in excess of $1 million, and as a result, many firms in this space simply avoid the hassle. My firm is still not licensed in this state because of the many roadblocks.
Only 20 companies have a BitlLicense, according to the state’s Department of Financial Services. To give you a sense of the difficulty, PayPal’s license is conditional.
Both companies and New York consumers lose out. Currently, New York state residents are prohibited from buying and selling bitcoin from any service providers not registered in the state — which is to say, nearly all of them. As a result of these rules and others, countless cryptocurrency exchanges simply do not allow New Yorkers onto their platforms.
Worse still, the state’s leadership has doubled down on this intransigence. Earlier this year, the state Senate passed a bill that banned cryptocurrency mining in New York. Although it died in the Assembly, having one of the two houses of the Legislature ban cryptocurrency mining was a worrying signal. Financial and technological innovations don’t come about when half your legislative branch seeks to outlaw that which is perfectly legal (and even encouraged) in other locales.
Regulations and legislative threats are hardly the kinds of moves that will turn New York into “the center of the cryptocurrency industry,” per the mayorelect’s boast. There’s a reason Blockchain.com moved its operations from New York to Miami this summer and so few of the consequential players in this space emerge from the Big Apple.
Still, Adams’ ambition ought to be commended, and the man is right to try to position the city as a cryptocurrency center. New York City has been the financial capital of the world for over a century, and it shouldn’t miss out on the next round of financial-services innovation — ceding that ground to Austin, San Francisco or Miami — because of backward thinking in Albany.
Under the new mayor’s leadership, Gotham should flex its local federalism muscles. The mayor can sound the trumpet and deploy political power to grow the industry in New York, starting by encouraging state leaders and officials to change the rules around cryptocurrency and the regulations preventing small blockchain startups from moving to the Big Apple. That begins especially with the BitLicense, which kneecaps the industry’s growth.
Adams could also begin to turn the city government into a bitcoin incubator. One of the most powerful uses for the technology is the efficient, fast distribution of funds — a function the city bureaucracy does to the tune of billions of dollars. He could encourage city agencies to remit payments in bitcoin, a process that would reduce administrative overhead and save taxpayers money.
Mayor Adams would likely find a receptive audience among his constituents for bitcoin innovation. Many of New York’s leading technology and finance firms have taken an active interest in bitcoin and its development. Bitcoin would also open doors for those outside traditional finance and create potentially thousands of new jobs for New York. The city has long been a magnet for talent, and the need for skilled, hardworking people in the bitcoin space has never been greater.
In other words, Adams’ enthusiasm is both winning politics and effective policy. He and other city leaders are right to signal their interest in bitcoin at a moment of growth and development for the sector. But words must match deeds, and the mayor-elect must do more to make New York City workable for bitcoin.
Doing that would enable him — and millions of others — not just to be paid in bitcoin but to benefit from the fruits of this technology in a meaningful way.