New York has a reputation for being anti-crypto. Crypto firms struggle due to their tight regulatory structure. Yet, other states regulate the crypto industry differently. BitLicense has made New York anti-crypto. This regulatory structure requires state-licensed firms. The NYDFS introduced this framework for virtual currency enterprises in 2015. BitLicense firms must follow AML and KYC laws.
Some crypto companies avoid New York because BitLicense is too onerous and restricted. Kraken, a renowned cryptocurrency exchange, suspended its New York operations in 2015 owing to BitLicense requirements. Several crypto businesses have complained about the regulatory structure, prompting some to call New York anti-crypto. Why does the region oppose crypto?
State attorneys general enforce state laws. Consumer, securities, and financial fraud laws are included. State attorneys general have prioritized bitcoin and blockchain technology enforcement in recent years. Fraud and consumer protection are concerns as cryptocurrencies gain popularity. Cryptocurrency exchanges, corporations, and individuals that break state laws may be prosecuted by state attorneys general. New York Attorney General Letitia James leads this race.
Democrats strictly regulate cryptocurrencies. The office launched the Virtual Markets Integrity Initiative in 2018 to protect cryptocurrency investors through transparency and accountability. The Attorney General’s office wrote to thirteen bitcoin exchanges asking about their operations, security, and compliance.
The exchanges have to fill out a questionnaire about their market manipulation prevention and customer fund security measures. Bitfinex and Tether settled allegations of covering up a $850 million client fund loss under the Virtual Markets Integrity Initiative.
The Attorney General sued Coinseed for deceiving investors and misappropriating funds. KuCoin, CoinEx, and Celsius Network have faced high-profile enforcement proceedings. James also accused Ethereum of operating unregistered as a securities, affecting ETH prices. One question arises. Why this intense hostility? Is James targeting crypto or is she justified? Letitia James’ treatment of the crypto industry has sparked debate.
The NY AG’s bitcoin crackdown protects investors and prevents fraud, according to supporters. They fear rogue actors can exploit unwary investors in the uncontrolled crypto market. “Letitia James has arguably done more to fight crypto fraud than any other law enforcement officer,” tweeted Parrot Capital, which has over 12,000 followers. New York has a history of regulatory overreach, but on cyber crime, they’ve done better than most.”
But, some say the AG’s crypto legislation is excessively heavy-handed and stifles business growth. Many think regulators should provide more direction than enforcement. Reddit users told BeInCrypto that AG wants to “score points in the political game (by going after cryptos)”.
The regulator’s treatment of the crypto business is complex and divisive. Are other states like that?
Some states have regulated the crypto industry, but it may taste awful. Wyoming approved many crypto-friendly laws in 2019. These acts exempted crypto assets from state securities regulations and created SPDIs to enable crypto firms with banking services.
Different states govern the sector in different ways. Some states demand money transmitter licenses for businesses. Others have developed regulatory sandboxes to test products and services without following restrictions. For cryptocurrencies to thrive in the U.S., rules are unclear. It is one reason the U.S. crypto adoption curve is lower than elsewhere.
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