Back in 2015, the New York Department of Financial Services enacted the BitLicense regulatory framework, which established a strict set of conditions and requirements that companies have to meet before conducting cryptocurrency-related business in the state.
The process to receive the license is expensive, but aside from the financial cost, many blockchain ventures aren't interested in providing the extensive disclosures needed to qualify. After the regulation was implemented, dozens of companies left New York.
The founders of two companies that left, Kraken and ShapeShift, spoke at the second full day of programming at Consensus 2018. "There were some things about it that were just untenable … having to disclose all the information about your global client base to the state of New York – we just couldn't live with," said Jesse Powell, founder and CEO of Kraken.
"I went from loving the city and seeing it as a symbol of progress … to seeing it as an enemy of innovation," said Erik Voorhees, founder and CEO of ShapeShift.
"The regulators here want to treat every financial entity like a bank … we aren't banks, we don't want to be banks … everything we build is to do something in opposition to what banks have done," Voorhees continued. The panel agreed that although New York is the financial capital of the world, the blockchain community is a global one, and they predicted that the BitLicense would ultimately harm the state more than it would harm the blockchain industry.
Few companies have been granted a BitLicense but one notable recipient is Ripple, and its board of directors now includes Benjamin Lawsky, the architect behind the BitLicense.
There has been talk of BitLicense being replaced. New York Assembly Member Ron Kim recently proposed a bill to eradicate the license in the hope of creating a more inviting environment for blockchain startups while still protecting investors.
Both Powell and Voorhees stated that they would be open to a discussion with New York regulators and would happily return to New York if sufficient alterations were made to the existing regulation.