A few weeks ago, I finally got the answer I’d been waiting for.
Readers of this newsletter may recall that back in May, I submitted a Freedom of Information Law (or FOIL) request to the New York State Department of Financial Services, in an attempt to find out how many companies had applied for a BitLicense, the state’s required license for cryptocurrency businesses.
The impetus for my inquiry was a controversial discussion at the massive Consensus conference in New York earlier that month, in which Erik Voorhees, the CEO of Shapeshift, a cryptocurrency exchange, had attacked the onerousness of New York’s crypto regulations and called the BitLicense “an absolute failure.” His argument hinged on a statistic—that in the nearly three years since the BitLicense was created, only four companies had actually received approval for one, a pace Voorhees thought was too slow for the process to be effective.
I wanted more context about what NYDFS was dealing with before jumping to any conclusions—perhaps the agency had been inundated with applications and was struggling to get through a backlog, or maybe few companies had even bothered to apply, which would reinforce other aspects of Voorhees’s critique. The answer turned out to be somewhere in between.
Finally, after NYDFS pushed back its self-imposed response deadline on several occasions, I received the information I had sought about the number of virtual currency license applications to date. As of last month, NYDFS had received 36 BitLicense applications since the program’s inception in mid-2015. Five of those 36 applications had been denied, the NYDFS said in answer to my request.
As for the applications that have been approved, the agency has picked up the pace in granting licenses following public criticism. In mid-November, NYDFS awarded its 10th BitLicense to NYDIG Execution, the sixth license it has issued since Voorhees made his comments. Other BitLicense recipients this year include Genesis Global Trading, Xapo, Square, Coinsource and Bitpay (the latter three were all named in my May report as next in line for potential approval).
Crunching the numbers, that means NYDFS has made a determination on 15 of the 36 BitLicense applications it has received—less than half. Overall, it has granted BitLicense applications at a rate of nearly three per year, though if it continues at the pace it set in the last six months, the NYDFS could be on track to grant 12 of the licenses next year, or one per month.
But perhaps the most surprising part of the NYDFS data is not how many BitLicense applications it has received, but how few. The last time the agency disclosed this information was in mid-2016, when it said it had received 26 BitLicense applications in the program’s first year. In the two-and-a-half years since, only 10 additional companies have applied, despite the fact that the cryptocurrency industry is exponentially more valuable than it was when the BitLicense was created.
Indeed, if New York wants to foster the fledgling cryptocurrency economy that has sprouted roots in the state, it would do well to fast-track the BitLicense applications that remain on its desk. Robinhood, which set out at the beginning of 2018 to offer commission-free cryptocurrency trading nationwide, is still waiting on a BitLicense before it can bring the service to New York, and other startups are in similar situations. There are likely even more companies watching what happens to their predecessors’ applications before deciding whether it’s worth doing business in the Big Apple.
THE LEDGER'S LATEST
To the Moon… PayPal created a blockchain just for employees. British politician suggests paying taxes with Bitcoin. Coinbase CEO thinks cryptocurrency will be big in VR. Mike Novogratz bought an $18 million private jet with Ethereum profits.
BALANCING THE LEDGER
Top five shakeup. The ongoing selloff that has lately been dubbed “crypto winter” has changed the face of the leading cryptocurrencies. Ethereum has lost its No. 2 spot among the most valuable coins, and Litecoin and Bitcoin Cash, once vying for third place, have fallen out of the top five altogether. Here are the five most valuable cryptocurrencies today by market capitalization, according to CoinMarketCap:
- Bitcoin ($61 billion)
- XRP ($12.6 billion)
- Ethereum ($9.6 billion)
- Stellar ($2.3 billion)
- Tether ($1.9 billion)
MEMES AND MUMBLES
Art imitating crypto? Kathleen Breitman, the co-founder of Tezos, the smart contract startup, was in Miami for Art Basel this week, and tweeted some dispatches from the massive show. Cryptocurrency, it appears, has been something of a muse to the modern art world—even if it has inspired more satire than respect.
One work Breitman caught on display at the famous art show depicts a woman in despair, as though she were starring in a commercial for depression medication. Instead, she’s apparently distraught by the prospect of her husband’s Bitcoin fortune going to the grave with him:
Mockery aside, that dreaded situation does actually occur, and can be understandably distressing for the people who have to face it.
FOMO NO MO'
Don’t miss out: An article in the latest issue of Forbes profiles Joe Lubin and his blockchain conglomerate ConsenSys, casting it in a less than flattering light. The piece raises questions about the sustainability of Lubin’s enterprise amid the sinking price of Ethereum and the shaky status of his investments to date. (After the article published, Lubin sent a letter to ConsenSys staff, part of which was published by Breaker, signaling a change in strategy.) An excerpt from the Forbes story: