The excitement and enthusiasm of Digital Currency entrepreneurs was palatable after the recent announcement by Ben Lawsky, New York’s first Superintendent of Financial Services, that the state would begin accepting license applications by Digital Currency exchangers. However, less than 48 hours after Lawsky’s announcement, feelings of frustration have replaced the excitement. Bitcoiners are quickly learning that the announcement does not apply to the majority of companies in the space.
Why are Digital Currency industry members so upset and frustrated?
New York is only accepting applications from “pure” exchanges. That is to say, exchanges that do not offer any other services or products other than exchange services.
Based on that information, the heavily funded, well-known and respected Bitcoin companies like Coinbase, Circle, Kraken, itBit or BitStamp are not being allowed to submit applications to the state. And it’s not likely that smaller, less visible companies will submit money transmitter applications because of the surety bond requirement. The $500,000 surety bond, which is required to be submitted with the NY application, is not attainable for these companies.
The motives behind this announcement are somewhat suspect. Having such a narrow scope of possible applicants doesn’t make much sense. If Lawsky and his team in New York really want to protect consumers by issuing Digital Currency specific regulations, then they should encourage the big industry participants to submit applications, not lock them out. And on the subject of consumer protection, a singular focus on exchanges for consumer protection purposes is shortsighted and will be found lacking. New York will accomplish little with this current application acceptance strategy.