Love it or leave it, New York state was a force in cryptographic regulations.
Ten years ago, the State created the first complete regulatory framework of the United States for companies dealing with cryptocurrencies, including keyword protection, anti-white and cybersecurity compliance directives.
In September 2015, the New York Department of Financial Services (NYDFS) published its first applied bit to surround the Internet Financial, allowing the company to carry out a commercial activity of digital money in the state. Ripple Markets received the second bit applied in 2016. Circle and Ripple became giant actors in the global cryptocurrency industry and stablecoin.
Today, the NYDFS regulates one of the largest cryptographic business areas in the world, and it is often cited as the ordeal for cryptographic regulations in the United States.
It is in this context that Ken Coghill, the deputy director of Nydfs for virtual currencies, appeared at the Conference of Cornell Tech Blockchain on April 25 to discuss “a new era of American innovation in crypto”.
“We have set up the railings”
Most of the companies that have come to the NYDFS for a Bitlicense are crypto-native companies, and often they are new in the financial world and are not used to dealing with regulators. Several times, they do not fully understand that they control the assets of someone else, noted Coghill at the New York conference, adding:
If you want to start a business and the only person you put in danger is your own business is not really our concern. We only exist because you sell something to someone else and maintain control of this product for someone else.
“We have put the railings,” said Coghill, and it is the work of the industry to understand how to stay in these railings. NYDF cannot consider all the elements that will be mistaken in a company.
Nowadays, more conventional financial institutions are also interested in the crypto, added Coghill. Large banks are starting to offer crypto child care, and others are starting to provide settlement services. “The conventional model (bank) is brought into cryptography (sphere) mainly because it puts people at ease,” said Coghill.
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And while the NYDFS has only issued 22 bitches to date, it seems to be ready to manage a tide of tradfi societies if and when they materialize. “On a basis per capita, we have more supervision resources focused on cryptographic companies than for all these other companies (non -crypto),” said Coghill. This includes 3,000 banks, insurance companies and other financial institutions.
Dubai cryptography regulator
It was not a direct route that brought Coghill to NYDFS in July 2024. He spent the previous 12 years in the Middle East working for the Dubai Financial Services Authority, finally becoming the head of the agency for the risk of innovation and technology.
It was a “whim” who took him to the Middle East in the first place, he recalls. “I went for three years and I stayed for 12 years”, spending this time mainly as world banks of systematically official importance, or G-Sibs. There, he was called upon to develop a cryptocurrency supervision model, and he therefore “spent the last six years regulating cryptocurrency in the Middle East”.
Finally, an opportunity arose to return to the United States, where he had worked earlier as manager of the Chicago Board Exchange market regulation department. Before that, he was a merchant of options. He took the new assignment with the NYDFS, among other reasons, because “the world is looking in New York, and the world turns to the DFS” with regard to the regulations, he told the public Cornell Tech.
The Neilva panel moderator asked Coghill what good regulations look like. “Good regulation is a regulation which does not prohibit activity but which applies appropriate railings that reduce risks to customers,” he replied. You cannot completely eliminate risks; To do this, would cancel all commercial activities.
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He compares the regulation to a pendulum that constantly swings between two extremes: too forgiving and too restrictive. “The pendulum has changed too far at one end of the regulation in recent years (that is to say too restrictive). Now it swings.”
What does the regulator of the state of the feverish regulatory activity do in Washington, DC at the federal level these days? There seem to be “positive tail winds” behind cryptocurrencies and floors, noted Desilva, himself a former financial director of the activity of digital currencies and Paypal funds.
A pipeline in Washington
“For DFS, it’s largely as usual,” said Coghill. This is because New York State has long set up crypto rules. In fact, “a large part of what is currently happening in Washington” – at the federal level – “is influenced by what we have done in the past 10 years” at the level of the state.
The state agency has regularly communicated with the powers in American capital concerning digital currencies. “We have a team that is practically in Washington and has discussions with the members of the Congress, speaking of what we think will work and what will not work.”
NYDFS Crypto initiatives have influenced other American states. California cryptography reform legislation (AB 1934) was promulgated at the end of September 2024, for example, based on New York State Bitlidense and its limited complacency trust charter regulations for digital currency companies – even if the Bitlicense license requirements are relatively strict.
https://www.youtube.com/watch?v=rkeyg7gj9em
All in the cryptography industry were not in love with the state crypto license regime, declaring that the bit-blocks are too expensive. Its demand costs are $ 5,000-too strict with its detailed anti-flowage protocols and required audits and generally too many obstacles to innovative crypto-natif companies. Crypto Exchange Kraken left the state when New York implemented his Bitlidense requirement, for example.
Desilva asked Coghill how the NYDFS really examines decentralized protocols in relation to the way in which it considers the centralized financial institutions which it has historically regulated.
It is important to look at the real goal of the product, said Coghill. What is its underlying intention? Who is used and what are his good and bad impacts? “There are a lot of innovations that are created for anything other than making a lot of money on its customers,” said Coghill. “And so it is up to us to filter them.”
“We are paid to look at everything in a dark and dark way. It is not our job to look and say:” Yes, it’s fantastic. “Rather, they examine a potential product and ask:” How is it bad for efficiency? ” Or “How is it bad for inclusion?”
How does he think that things take place at the federal level this year concerning the legislation on cryptography and the stablescoin?
What will happen to happen (in Washington, DC)? Who knows? We could know in six months. We may know things next week. Things have changed very quickly recently.
In the meantime, “we always accept applications. We always deal with these applications. We always focus on our underlying objectives: protecting the market, protecting consumers, supporting innovation. ”
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