Crypto firms in New York will soon have to contribute to their own regulation after the state’s financial services watchdog received new powers as part of a $220 billion budget agreement.
In line with legislation signed off as part of the state’s 2023 fiscal year budget, New York’s Department of Financial Services (DFS) will charge crypto companies just as it does banks and insurance firms.
As reported by Law360, a DFS statement says the money will go toward regulating and supporting the industry.
The DFS has not revealed the amount companies will have to pay. Instead it says that entities will be assessed “in such proportions as the superintendent shall deem just and reasonable.”
The DFS will calculate these proportions using a formula it will develop in conjunction with the firms themselves.
In a recent statement, DFS superintendent Adrienne Harris explained the reasoning behind this new provision:
“At DFS, we have the ability to assess banks, we have the ability to assess insurance companies, and that’s how we fund this agency.”
“We don’t take taxpayer money. We are paid for by assessments from the industry, and we don’t yet have the ability to assess virtual currency companies.”
Until now New York crypto firms have only paid $5,000 to the DFS
Crypto companies in New York already pay the DFS. However, they only hand over $5,000 for their initial application for a BitLicense.
A BitLicense is the controversial certification that, since 2015, businesses dealing in virtual currencies in New York have had to hold.
Critics say that not only is it incredibly difficult to obtain, but it can also cost around $100,000 once we factor in legal fees and associated costs.
Until now, the DFS and the taxpayer have shouldered the financial burden of regular checks and other costs.
Harris has been promising to close this loophole for some time. She indicated support for such measures in her confirmation hearings in January.
While many in New York’s crypto industry have welcomed the move and the better regulation it will bring, some have spoken out against the measures.
In an interview with Law360, attorney and board member for the New York Blockchain and Crypto Association, Randy Kleinman, said it would simply place another hurdle in the way of businesses looking to become licensed.
“It’s putting the cart before the horse,” said Kleinman. It’s a little ridiculous that they’re even thinking about taxing when they haven’t even figured out a really good system for allowing companies to get the BitLicense.”
Follow us on Twitter for more informed news.
Out now: the first three episodes of our new investigative podcast series Innovated: Blockchain City.