This article was first published on Insights – Ripple
There is little doubt that blockchain and digital asset technologies will engender greater financial inclusion and economic growth—but to realize the full potential of this technology, clear regulatory frameworks are needed.
One such framework, New York’s BitLicense, was introduced in 2014 by Benjamin Lawsky, then New York State Superintendent of Financial Services. Lawsky is currently a director on Ripple’s Board.
BitLicense is the common term used to describe New York’s business license governing companies in the digital asset space. It defines what constitutes a digital asset business and establishes certain requirements for operation.
At Swell, Lawsky joined Ripple General Counsel Stuart Alderoty to discuss the origins and design of BitLicense and how lessons learned from the BitLicense may help inform future regulatory frameworks.
Civil War-era Regulations
In 2014 when Lawksy and his team began the design for BitLicense, there was no precedent for digital asset regulation. Lawsky remarked that New York laws written during the Civil War-era were being applied to this newly developing technology.
Additionally, Lawsky’s team knew it was stuck between competing worlds. “FinTech was a world of innovation, which has led a thousand flowers to bloom and basically has no regulation, colliding with the world of financial services, which is the most conservatively, fully-regulated area we have,” explained Lawsky.
On reflection, Lawsky considers BitLicense to have been largely successful, pointing to the numbers as evidence. According to his count, 22 companies obtained a BitLicense and continue to operate successfully in New York to this day. On the flip side, 15 companies declined to secure the license and left the state. Of those 15, he says seven have suffered either a hack or endured money laundering issues.
That outcome is what Lawsky had hoped for—to craft a framework that could ...
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