It’s frustrating to be a crypto enthusiast who lives in New York State.
You’d think that the home of Wall Street would be friendly to investors, but it turns out that this is only true if you invest via traditional markets and not digital asset markets.
Don’t get me wrong — you can still buy crypto in New York. It’s just that your options for doing so are limited compared to other US states and more crypto-friendly jurisdictions abroad.
So, why is it so difficult to buy crypto in New York?
The BitLicense
In 2015, New York State’s Department of Financial Services (NYDFS) issued virtual currency regulation 23 NYCRR Part 200, more commonly known as the “BitLicense” regulation.
Crypto exchanges must have a BitLicense to serve New York residents.
You may be thinking, “Okay, so what? These crypto companies are too lazy to fill out some paperwork?”
If only it were that easy.
Bitstamp reported paying approximately $100,000 for its BitLicense, and a representative from the company said the process of acquiring the license was “difficult.”
Kraken — one of the top five crypto exchanges in the world by trading volume — decided not to even go through the application process when its CEO Jesse Powell reported that it would have had to have shared information on its global client base with regulators in New York if it wanted the license.
Smaller, startup-level crypto companies and exchanges likely don’t have the money, personnel or even time it takes to obtain the license.
Hence, only a few native crypto exchanges, including Coinbase, Bitstamp and Gemini, are permitted to operate in New York State. And these exchanges are only allowed to support certain crypto coins and tokens.
New York’s Approved List Of Coins And Tokens
One hundred and four crypto coins and tokens have been either approved or preapproved (“greenlisted”) by NYDFS for either listing on or custody via an exchange. Of these 104 coins and tokens, 66 can be listed for sale and 100 can be held in the custody of the exchange.
This is to say that only a very small fraction of the 20,000 crypto coins and tokens out there are legally permitted to be sold on a centralized crypto exchange in New York.
Some, especially Bitcoin maximalists — those who believe Bitcoin (BTC) is the only crypto asset worth investing in — might argue that it’s a good thing that New York doesn’t allow for the listing of many altcoins, as many of them have lost most of their value in this crypto bear market and are considered scams.
But even BTC maxis have reason to be frustrated with New York, as you cannot purchase Bitcoin — the most popular crypto in New York — from some of the most popular Bitcoin-only or Bitcoin-centric exchanges and apps out there.
Even Popular Bitcoin-Focused Platforms Can’t Serve New Yorkers
It seems difficult to believe that the Strike app, a payments app that harnesses the power of the Lightning Network (a layer-2 scaling solution for Bitcoin) and that allows you to buy and sell Bitcoin, now serves 3 billion users in 65 countries but not New York residents — thanks to the BitLicense.
This is particularly frustrating given that residents of 48 other US states are permitted to use Strike.
The same is true for the popular Bitcoin-only exchange Swan Bitcoin, a go-to exchange for many hardcore Bitcoiners.
And while you can earn Bitcoin rewards with the Fold App, you still can’t use the app to purchase Bitcoin if you’re a resident of the Empire State.
Will New York Ever Scrap The BitLicense?
New York City’s mayor, Eric Adams, has urged the state to get rid of the “stifling” BitLicense, claiming that continuing to impose the regulation will make the state uncompetitive.
Adams, who accepted his first paycheck in the form of BTC and ether (ETH), has been vocal about how he wants to make New York City a center for crypto, but he hasn’t made much progress with the powers that be at the state level.
There’s been no indication that state government officials have any plans to revisit the idea of the BitLicence and whether it is helping or hurting New Yorkers.
Instead, New York State governor Kathy Hochul along with the state legislature have been busy putting a temporary ban on Bitcoin mining in the state.
All the while, crypto companies and exchanges continue to set up shop and serve customers in friendlier jurisdictions.
How much longer can New York City call itself the financial capital of the world when a licensing scheme keeps New York residents from investing more broadly in crypto — an asset class that’s inherently global?
While the answer remains to be seen, those of us who live here can only hope that New York will come to its senses soon while we continue to invest in Bitcoin and crypto via the few options available to us.