Fun

Wyoming’s New Crypto Banking Law Could Defang New York’s BitLicense

News Feed - 2019-11-15 06:11:15

There’s a way cryptocurrency businesses can get around New York’s notoriously hard-to-get BitLicense, and it runs through Wyoming.


At least, so say members of the team that drafted the 13 crypto-friendly laws enacted by the Western state this year. One of those laws allows Wyoming to charter Special Purpose Depository Institutions (SPDIs), a new type of fully-reserved fiat bank that can also custody crypto assets.


With an SPDI, crypto exchanges and other startups could operate in New York without going through the state’s licensing rigmarole, under the same legal principles that exempt banks from needing state money transmitter licenses, Wyoming advocates said.


“We are fairly confident that the Wyoming SPDI will be able to operate in New York without a BitLicense,” Chris Land, general counsel of the Wyoming Division of Banking, said Tuesday at CoinDesk’s Invest: NYC event in New York.


The New York Department of Financial Services (NYDFS), which created the BitLicense in 2014, did not answer requests for comment by press time.


The BitLicense was one of the earliest regulations specially crafted for the blockchain industry. But many firms have complained that it is onerous and has driven entrepreneurs and innovators away from New York, the U.S. financial capital.


Only 18 BitLicenses have been granted in the rule’s five years of existence. Getting hold of one is known to be a slow and expensive process, and that’s if you are in full compliance with all the requirements, which amount to a heavy-duty version of a money transmitter license. Some companies that fell short of NYDFS’ expectations have publicly bemoaned the process. Banking balm


In addition to addressing the BitLicense problem, an SPDI could ease a longstanding pain point for crypto businesses: the difficulty of obtaining banking services.


Once approved for the charter (the statutory minimum capital requirement to apply is $5 million), firms would have master accounts with the Federal Reserve and the own ability to clear their own wires.


In other words, they could literally be their own banks, to use a familiar motif from crypto-land.


“Some companies might choose to partner with unaffiliated SPDIs and others might choose to create their own affiliated SPDI,” Caitlin Long, the gubernatorial appointee to the Wyoming Blockchain Task Force, told CoinDesk.


“The significance is that crypto companies won’t need to rely anymore on the few traditional banks that have been willing to bank the industry,” she said.


The handful of crypto-friendly banks in the U.S. includes Silvergate in California and Signature and Metropolitan Commercial in New York. Long said one of the best-known of these banks (she wouldn’t say which one) employs 65 compliance officers, making the whole business very expensive. History repeats


If the Wyoming SPDI works out as suggested, it could be seen as an interesting parallel to the way Citi found a clever way to sidestep New York’s tough usury laws. The bank made a landmark decision in 1981 to move its credit card operation to South Dakota, where legislators were won over by Citicorp’s promise of jobs if that state lifted its usury ceiling.


And as part of the “far-reaching impact” of the SPDI, Long said she is optimistic the NYDFS will view the bank charter as trumping the BitLicense since banks have higher capital and regulatory requirements than money transmitters do.


“The Wyoming SPDI would need to apply to NYDFS to open a branch in New York and NYDFS would need to approve the application, but there’s a lot of favorable case law precedent,” said Long, a former Morgan Stanley executive. “So if NYDFS denies the application, I think it would go to litigation and the Wyoming bank would likely prevail.”


Long also sounded optimistic about lawyering up if need be. After she spoke alongside Land on Tuesday’s panel, she said, “multiple New York attorneys came up to volunteer pro  bono  to help the Wyoming Banking Division litigate if it ever comes to that.”


From left: Caitlin Long, Chris Land, Mary Beth Buchanan of Kraken and Anette Nazareth of Davis Polk at Invest: NYC 2019, image via CoinDesk archives

News Feed

‘Wealthiest US prisoner’: How did Binance founder CZ get there?
Helen Partz3 hours ago‘Wealthiest US prisoner’: How did Binance founder CZ get there?Binance founder and former CEO Changpeng “CZ” Zhao is the wealthiest person to serve jail time in the US, with current net wort
NH Governor Signs Executive Order to Bring ‘Regulatory Certainty’ to Cryptocurrency Industry
NH Governor Signs Executive Order to Bring "Regulatory Certainty" to Cryptocurrency Industry The governor of the U.S. state of New Hampshire has signed an executive order establish
Dogwifhat (WIF) hits new monthly high after 40% price rally
Nancy Lubale4 hours agoDogwifhat (WIF) hits new monthly high after 40% price rallyWIF rallies to a monthly high after a 7-day bull run added 40% to the memecoins’ value.455 Total views16 Total sharesListen to article 0
Korean Government Says 28 Crypto Exchanges Have Met Regulatory Requirements to Continue Operations
Korean Government Says 28 Crypto Exchanges Have Met Regulatory Requirements to Continue Operations The deadline for cryptocurrency exchanges to meet the requirements to continue op
Bitcoin Network Preps for Another Difficulty Spike as Hashrate Remains Strong and Miners Profit Amid Price Surge
Bitcoin Network Preps for Another Difficulty Spike as Hashrate Remains Strong and Miners Profit Amid Price Surge Following the last two difficulty increases on the Bitcoin network,
Economist Mohamed El-Erian Predicts ‘Sticky’ Inflation Despite Federal Reserve’s Efforts to Bring it Down
Economist Mohamed El-Erian Predicts ‘Sticky’ Inflation Despite Federal Reserve"s Efforts to Bring it Down As investors examine the next move of the Federal Reserve, analysts, e
What the CFTC Chairman Actually Said About Ether Futures and Ethereum 2.0
The Takeaway: CFTC Chairman Heath Tarbert said last month that ether is a commodity, and he expects to see regulated ether futures in the U.S. in the next six months. The ethereum network is expected to transition from i
Bitcoin volatility hits 20-month high, traders hedge against further slump
Ciaran Lyons5 hours agoBitcoin volatility hits 20-month high, traders hedge against further slumpBitcoin’s volatility index reached its highest level in 20 months, but traders are unsure if there will be more pain ahea
Small Business Owners Study Says Los Angeles Ranks the Most Crypto-Friendly City in the US
Small Business Owners Study Says Los Angeles Ranks the Most Crypto-Friendly City in the US A recent study conducted by the online invoicing company that works with small businesses
Ripple Settles Legal Dispute With Youtube Over XRP Giveaway Scams
Ripple Settles Legal Dispute With Youtube Over XRP Giveaway Scams Ripple and Youtube had ended a legal battle initiated in April last year amid allegations relat
French Central Bank Job Posting Reveals Digital Currency Program
The central bank of France, Banque de France, is seeking a blockchain analyst who will help the bank define a program for implementing digital currency. In a job opening posted on O
Moonshot to $90K — After Bitcoin Upgrade Taproot Activates, Crypto Advocates Expect the Price to Rally
Moonshot to $90K — After Bitcoin Upgrade Taproot Activates, Crypto Advocates Expect the Price to Rally In mid-June, the ‘Speedy Trial’ lock-in period for the Bitcoi