A bill that may turn New York into a friendlier place for crypto entrepreneurs has been introduced in the state’s Assembly. The draft is intended to “safeguard” cryptocurrency business activity and “prohibit” licensing fees. Its sponsors want to replace the costly Bitlicense regulations with a licensing regime based on audits. The aim is to protect investors, while supporting growth in the crypto sector.
Also read: Several States Spearhead Bitcoin Adoption in the U.S.
Introducing the Digital Seal
If adopted, Assembly Bill A09899 will amend the New York’s banking law. The current licensing regime will be replaced with a new mechanism based on independent audits, which will protect investors and reassure customers. The new §9-x section will require any private individual or corporate entity conducting crypto-related business activity to be audited by a public or a private third party depository service.
The auditors should ensure that persons and companies dealing with cryptocurrencies have established security protocols to safeguard them from theft, thus increasing public trust. They must also verify if crypto businesses maintain a fund insuring a portion of their account holders’ assets by the Securities Investor Protection Corporation or other approved insurer.
Third parties are expected to regularly examine holdings of entities conducting crypto business to ensure proper ownership of assets. Those that are in full compliance with the law should receive a digital New York State seal of approval. It will replace the current fee-based licenses. The draft unambiguously states:
Notwithstanding any other law, rule or regulation, no person, corporation, partnership or other entity that conducts cryptocurrency business activity shall be required to pay a licensing fee.
Protecting Investors, Reducing Red Tape
The amendments are meant to protect cryptocurrency investors on one hand, and reduce bureaucratic and regulatory burdens on crypto businesses on the other. Bill A09899 was introduced by Ron Kim (D) and co-sponsored by several other legislators. The draft has been referred to the NY State Assembly Committee on Banks last month.
According to the bill, the term “cryptocurrency business activity” includes receiving and transmitting cryptocurrencies. The services of storing, holding, and maintaining custody or control of cryptocurrency on behalf of others are also covered by the definition. It excludes, however, “transactions undertaken for non-financial purposes” under what it calls “nominal amount of cryptocurrency”.
The legal document encompasses activities such as buying and selling cryptocurrency, performing exchange services, as well as controlling, administering, and even issuing coins. The authors note that with digital currencies, encryption techniques are used to regulate the generation of units and verify the transfer of funds, “independently form a central bank”.
Several crypto-related bills have been introduced in New York in the past few months. One of them, AO8783, again co-sponsored by Ron Kim, aims to create a “digital currency task force”, as news.Bitcoin.com reported. Its primary duty – to provide the governor and the state legislature with information on the potential effects of the implementation of cryptocurrencies on financial markets. Other texts have defined terms like blockchain, smart contracts and tokens.
New York was among the first states seeking to adopt comprehensive cryptocurrency regulation, but it has been criticized for some of its aspects. Currently, businesses dealing with cryptos, like bitcoin, need to apply for a Bitlicense from the state’s Department of Financial Services and pay a fee. On the positive side, crypto companies are not required to obtain a full money transmitter license.
Do you think New York state legislators will adopt the bill that prohibits licensing fees for crypto businesses? Tell us in the comments section below.
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