New York’s controversial cryptocurrency regulatory framework -- the BitLicense -- is frequently criticized in industry circles as an example that regulators in other jurisdictions should not follow if they hope to encourage innovation in this burgeoning field.
However, Maria T. Vullo, superintendent of the New York Department of Financial Services (NYDFS), said on Thursday that this perspective is childish.
Vullo made these comments during a panel discussion hosted by the Council on Foreign Relations (CFR). Responding to a claim from fellow panel member Blockchain President and Chief Legal Officer Marco Santori that the BitLicense has caused New York to become a “crypto backwater,” Vullo had strong words for industry stakeholders who have criticized the regulatory framework as heavy-handed.
"I think regulators absolutely need to be in the space. I know [companies] are saying 'we're innovative, we're startups, we need to be left alone and put in a sandbox.' Toddlers play in the sandbox. Adults play by the rules."
Elsewhere during the discussion, which also touched on a range of topics including cryptocurrency mining and initial coin offerings (ICOs), Vullo said that her job is to “mitigate the risk” of criminal activity and that this requires regulations.
“The idea [that] startups get to be in the space before they’re regulated is just not something that is consistent with what we do here in this country in terms of mitigating risks when people, particularly people’s financial well-being is part of the equation,” she said.
Vullo also took issue with the idea that the BitLicense stifles innovation in the blockchain field. As CCN reported, the agency has approved just five applications since 2015, when the framework was finalized. Nevertheless, the superintendent said that the potential of distributed ledger technology (DLT) expands far beyond cryptocurrency and that the framework targets a narrow range of risky acitivities.
“I think we also need to separate the sort of transmission of the bitcoin from the technology that underlies this,” she said. “We’re not regulating the technology. We’re regulating certain types of activities through which that technology is being used, and I think that technology has lots of promise for other things as well.”
"We need to do our best to manage the risk and at the same time allow something new to flourish, but the international nature of this and the technology is really what’s taking us [time] because some people are uncomfortable,” she added.
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