New York Regulator Details Changes to Contentious BitLicense

The New York Department of Financial Services (NYDFS) is getting specific about how it will update its controversial virtual currency license.

Announced Wednesday by Superintendent Linda Lacewell at a breakfast held by Crain’s New York, the proposed guidance will modify the approval process for listing new cryptocurrencies. Under the current regime, NYDFS approves every cryptocurrency offered within the state on a case-by-case basis with individual exchanges.

The guidance released Wednesday includes two specific updates the public can comment on: Any coins the regulator approves for listing in New York can be listed by any exchange that operates in the state, as long as they provide notice to NYDFS; and the regulator will publish a model framework for coin listings that exchanges should model their versions around.

"It's more than time to take another look at the virtual currency regulation given the passage of time, changes in the industry, maturation, sophistication and new business models," she said. "What tweaks and changes can we make should we make because, while it is our obligation to regulate, we only want to have enough regulation to get the job done and not a drop more."

NYDFS is accepting comment on its new public framework until Jan. 27, 2020. According to a press release, this is only a first step in the regulator’s review of the license.

Existing licensees will not have to re-apply, Lacewell said.

The new framework looks at how an exchange approaches a coin’s governance, risk and monitoring, with each category including a number of concerns the regulator would like to see addressed before approving any listing.

"The idea being that you already have a license, you already have passed muster and have the controls in place, you are subject to examination by us," she said. "And we've approved a lot of coins since the early days so can [we] cut through the red tape and can we get to a place where responsible licensed companies can self-certify under appropriate guidance that we're putting forward?"

The five-year-old framework, originally referred to as the BitLicense, has long proven controversial, with exchanges such as Kraken and ShapeShift pulling out of New York entirely after it was passed under previous NYDFS Superintendent Ben Lawsky.

To date, 24 exchanges, bitcoin teller machine providers and other crypto companies have been granted the license, including major firms such as Coinbase and Circle.

However, Lacewell, who took office earlier this year, announced in October during DC Fintech Week that she was reviewing the existing regulatory framework, although she provided few details.

She told CoinDesk at the time that the crypto industry had changed since the license was first fully implemented in 2015, and it was “a good time” to evaluate what this evolution meant for the license.

“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 at the time.

Wednesday’s unveiling is the latest in a series of moves NYDFS has made this year to bolster its cryptocurrency chops. The regulator announced it was creating a division to oversee cryptocurrency in July, dubbed the Research and Innovation Division.

"We're recruiting in the cryptocurrency space because we need more people," Lacewell said Wednesday. "Please pass along good resumes."