In a bid to maintain its position as one of the initial regulators of digital currency, the New York State Department of Financial services is taking specific steps.
With the introduction of the blockchain-focused BitLicense in August 2015, Mario Vullo, the superintendent of NYDFS, displayed her agency’s contribution towards the maturity of the digital currency space.
On April 10 2018, she discussed the agency’s continual efforts to supervise the crypto space, based on statements in at the Conference of State Bank Supervisors spring meeting.
Vullo spoke about BitLicense results, and was sure about the regulation helping in protecting market integrity by introducing “stringent standards applicable to all law-abiding business enterprises.”
“The regulatory structure that we created for virtual currency has helped our licensed companies attract greater interest from customers, investors, and potential financial services partners seeking to pursue further innovation.”
Mt.Gox Monopoly Prompted BitLicense Formation
As the problems of Mt. Gox, which was handling 70 percent of bitcoin trades in 2015 and faced security concerns, and allegations of market manipulation,continued to grow, Vullo’s agency considered setting up strict regulations to prevent such problems in the future by US-based crypto-businesses. The agency held multiple public hearings in the early half of 2014.
In 2015, BitLicense got finalized, as the virtual currency business got governing rules drafted by the regulator.
Citing the example of Mt. Gox, where fatal flaws were the reason why investors lost hundreds of millions of dollars worth of bitcoin, she said that the regulation would make sure that the competition amongst newbies will not be a “death race.”
Vullo emphasized the agency’s focus on consumer welfare and industry compliance, saying:
“DFS and the states have helped set the standards through our application and examination processes to ensure that customer protection is taken seriously, and cybersecurity and [anti-money laundering] standards are respected.”
Government Sceptical About the Cryptocurrency Regulator
A good part of the industry sees BitLicense as an imposing regulation body, but, the criticism does not deter Vullo from continuing to work on it.
In February, Ron Kim, an assemblyman at New York State, submitted a bill with the aim to replace the framework as only a few companies have opted for the license.
Earlier in 2015, article 78 was filed in the Supreme Court of the State of New York challenging the authority of the New York State Department of Financial Services to define a “virtual currency.” The case was recently dismissed in January 2018.
Only Three Companies Are “BitLicensed”
Despite its sheen, few have come forward to be “BitLicensed,” with many businesses mostly getting rejected.
The world’s first BitLicense was granted to bitcoin exchange Circle in 2015. Since then, the company has moved away from its core exchange business to that of a cryptocurrency wallet.
Payments network Ripple, the world’s third-largest cryptocurrency by market cap, was awarded the second BitLicense in 2016.
The latest BitLicense was issued in January 2017 to San Francisco-based Coinbase, one of the most funded startups in the bitcoin industry.
Remarks from the meeting are available here.