Those working in investments and fund management have long been subject to strict rules and regulations. This is to ensure the safety of investors and mitigate the risk of fraudulent or criminal behavior.
In recent years, these regulations have been further complicated by the development of virtual currencies and digital assets. Not only have fund managers and others in the financial sector had to navigate existing regulations, but they have also had to anticipate the potential for new, complex regulations.
Projections for cryptocurrency growth in the U.S. predict annual growth rates of 15.19%, culminating in over $31.5bn in revenue by 2027.
The long-term compliance of investments has been subject to many regulatory requirements. In particular, those in New York have had to work within the parameters set by BitLicense which was created in 2015.
Since its implementation, all businesses working with virtual currency must have a BitLicense to ensure compliance.
This cryptocurrency regulation is unique to New York and the license covers all activities carried out with virtual currency by individuals or companies. Licenses are issued by the NYSDFS (New York State Department of Financial Services).
The license has been seen by many as an unnecessary hurdle for those in the industry. Those working with blockchain see the regulations as significantly more challenging than necessary and many blame it for hindering the development of the sector in the state of New York.
2020 saw the implementation of a less stringent framework that allowed collaboration between existing license holders and those that require guidance with personal requirements, the systems used, capital, and structure.
While application fees are set at $5,000, it is estimated that the true cost of applying for a BitLicense in New York could run as high as $100,000 after the time and legal costs involved are calculated.
This cost and the complications involved have seen many startups move to more lenient states where they can conduct business without jumping through as many regulatory hoops.
But who needs a BitLicense in New York? To put it simply, fund managers who operate in New York and work with digital assets should obtain a BitLicense. Regulations and state-level rules typically govern companies and individuals that carry out most of their business in one area.
New York residents and those whose business is principally located in New York will not be able to form management companies in neighboring states to avoid these regulations.
It is still possible that companies formed outside New York and that principally operate outside the state, but accept investments from New York residents, can still be subject to the licensing regulations.
It is not just the financial sector that has seen the development of cryptocurrency change the landscape of its operations. Online sports betting in the U.S. has also benefitted from the ease with which crypto can be used for online transactions. There are a number of crypto sportsbooks analyzed by Techopedia that offer users a variety of benefits compared to betting sites that only accept fiat currencies. The Empire State is also home to a selection of major crypto events for enthusiasts to attend, most notably the New York Blockchain Week. Major crypto operations like blockchain.com and Gemini also have their headquarters in New York—clearly, more and more are seeing the benefits of digital currencies here.
So, with the popularity of cryptocurrency growing, it remains to be seen whether other states will follow New York’s example and implement more stringent regulations.
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