The Ledger: Is New York’s BitLicense an ‘Absolute Failure?’

That’s how Erik Voorhees, the CEO of cryptocurrency exchange ShapeShift, described the reigning regulatory regime for New York’s Bitcoin industry last week during Manhattan’s Consensus conference. Voorhees had pulled his company out of New York when the state established the BitLicense in June 2015. In the nearly three years since, only four companies had managed to secure a license from the New York State Department of Financial Services (NYDFS), Voorhees noted. “Get rid of the BitLicense,” he urged.

Two days after Voorhees’s comments, the NYDFS, as though in retort, granted the fifth BitLicense to Genesis Global Trading. It joins Circle, Ripple, Coinbase and BitFlyer in the exclusive club of BitLicense holders.

Still, Genesis had waited nearly three years to be approved, having submitted its application in August 2015. Its approval also followed a six-month dry spell since the previous BitLicense was granted; the NYDFS has gone up to 11 months without pushing out a new BitLicense—roughly equal to the gestation period of a humpback whale.

One theory for the glacial pace of BitLicense approvals is that the regulators have simply been inundated with new applications, creating a backlog. Square, for example, the publicly-traded payments company that began offering Bitcoin trading earlier this year, confirmed to Fortune that its BitLicense application is currently pending the agency’s review. Robinhood, which now offers crypto trading in 15 states, and eToro, a London-based trading platform that’s entering the U.S. market, are also planning to apply for a BitLicense, if they haven’t already. Add to the list Goldman Sachs, which told the New York Times that it’s considering trading “actual Bitcoins” (in addition to Bitcoin derivatives) “if it can get regulatory approval”—ostensibly meaning a BitLicense.

Yet despite the fresh class of applicants, several industry experts say the line is not as long as it seems. “What I have heard is that there may be far fewer active applications than New York would like people to believe,” says Alex Kern, a research analyst at Fundstrat Global Advisors who covers cryptocurrency and macro equity. He and others estimate that there are as few as 15 BitLicense applications currently pending before NYDFS—maybe less—factoring in rejections and application withdrawals.

That’s down from the 26 applications NYDFS said it had received by June 2016—the last time the NYDFS disclosed application numbers. When I asked the agency for updated statistics, the NYDFS press office declined to provide it, instead instructing me to submit a Freedom of Information Law request to obtain the data. (I will report back on any response I receive.) When I asked whether there had been an increase or decrease in applications, the NYDFS told me the “information is unavailable” entirely.

In light of a shrinking applicant pool, the NYDFS’s progress on its BitLicense approval pipeline looks even more dismal. At this rate of five approvals per three-year period, the NYDFS won’t get through the estimated 15 pending applicants until 2027.

“It can’t be a three-year process,” says Arnold Spencer, general counsel for Coinsource, the largest operator of Bitcoin ATMs, which applied for a BitLicense back in summer 2015. “So you need to either speed up that process, or you need to lower the bar.”

There are some hints that the bottleneck may be clearing, though, with companies including BitPay, Coinsource, and BitStamp anticipating that their applications could be approved imminently. For more on that—and on the reasons for the holdup—read the rest of this article here.

THE LEDGER'S LATEST

How JPMorgan Chase Learned to Love the Blockchainby Robert Hackett

One of the World's Largest Stock Exchanges Is 'Deep at Work' With Bitcoinby Lucinda Shen

Coinbase Acquires Paradex Exchange, Retires GDAX Nameby Jeff John Roberts

Ticketfly Cofounder and Monero Ringmaster Start New Blockchain Projectby Robert Hackett

Meet Crypto's Meme King: 5 Questions for Neeraj Agrawalby Jeff John Roberts

Meet the Goldman Sachs-Backed Fintech Startup Aiming to Take Over North Americaby Jen Wieczner

Regulators Crack Down on Crypto Scams via 'Operation Crypto-Sweep'by Polina Marinova

Japan's Biggest Bank to Switch on Blockchain Payments in 2020by Robert Hackett

PayPal Alum: How Blockchain Will Change Investing and Why Real Estate Will Be Firstby Jeff John Roberts

DECENTRALIZED NEWS

To the moon... The $140,000 Cryptokitty. Xapo flips on the SegWit switch. Zimbabwe lifts Bitcoin exchange ban. PayPal will support Bitcoin if it's "a better currency." Coinbase and 250 other crypto companies all use the same tiny San Diego bank. Meanwhile Coinbase gets closer to becoming a bank. Buy seven cryptocurrencies with one click. An inspiring meditation on money. The Marshall Islands adopts cryptocurrency as its official tender instead of the dollar. Ashton Kutcher donates $4 million worth of Ripple's XRP to Ellen DeGeneres's charity. 

....Rekt: The Justice Department is investigating Bitcoin trade manipulation. Nobel laureate Robert Shiller doesn't think anyone, "outside of computer science departments, can explain how cryptocurrencies work." Ethereum blockchain exceeds 1 terabyte. Royal Wedding outranks Bitcoin in Google searches. Crypto influencer wars over the meaning of blockchain. Russian accused of laundering Mt. Gox's stolen Bitcoins confesses. Bitcoin ransoms for basset hounds?

BALANCING THE LEDGER

Michael Sonnenshein, managing director of Grayscale Investments, dropped by Balancing The Ledger to talk about the advantages of the regulatory crackdown; how the Bitcoin selloff has brought in new Wall Street money—and $200 million so far this year—into its cryptocurrency investment products; and what happens if Bitcoin doesn't survive.

BUBBLE-O-METER

About those ubiquitous, pestilent Ether giveaway scams on Twitter...for an example, meet one of the several scammers impersonating me, whose account has not yet been suspended: @jenwiceczner. They've lifted my bio verbatim, and until recently, even used my profile pic. (I assure you, I am not giving away ETH.)

• 5%—percentage (estimated) of cryptocurrency-related Twitter conversations targeted with Ether giveaway and other phishing scams
• 6 million: number of suspicious Twitter accounts the company identifies and reviews per week

(Sources: Autonomous Research and Twitter, via Bloomberg)

MEMES AND MUMBLES

Mumble: There's a rivalry brewing between Coinbase and Robinhood, with the latter telling me recently that—after just beginning to offer Bitcoin trading a few months ago—it's now gunning to be the No.1 cryptocurrency exchange by the end of this year. Robinhood, which started as a no-fee stock trading app, announced its new crypto service in January with the slogan "Don't Sleep;" the company also wallpapered its offices and bathrooms with posters bearing that motto.

Well, when Bloomberg reporter Julie VerHage caught wind of a similar office decor scheme at Coinbase, a spy provided photographic evidence to Fortune:

Meme: Donald Trump abruptly canceled the his historic summit with North Korea's Kim Jong-un this week—but not before the White House had already minted special commemorative coins for the occasion. Though there is nothing digital or cryptographic about the coins, their apparent rarity—and the resulting demand surge that crashed the White House gift shop website—prompted hilarious comparisons to cryptocurrencies.

FOMO NO MO'

Don't miss out: The annual Fortune 500 issue is out, and it includes a fascinating deep dive from my Ledger co-editor Robert Hackett, exploring in vivid detail the "odd-couple" relationship between JPMorgan CEO Jamie Dimon, and Amber Baldet, the bank's recently departed head of blockchain. Baldet left to co-found a blockchain startup with Patrick Nielsen, another JPMorgan alum, called Clovyr, whose mission seemed abstract to me until reading Robert's story, which crystallizes it perfectly:

Baldet and Nielsen envision a world, not far off, where permissioned (business-ready) and public (Bitcoin-like) blockchains are joined much more closely. Baldet compares the state of blockchains today to the period a few years ago when corporations were weighing using public clouds such as Amazon Web Services or Microsoft’s Azure. Eventually, they settled on hybrid architectures that include both private and public clouds, enabling more resilient, efficient ways of doing business. (Christine Moy, who succeeded Baldet as head of the JPMorgan Chase team, sees the blockchain world similarly; she recently told the website Coindesk, “Maybe someday this will all converge.”) That’s part of Baldet’s and Nielsen’s impetus to found Clovyr, their new startup, which takes its name from the cloverleaf infrastructure of highway on-ramps and off-ramps.

We hope you enjoyed this edition of The Ledger. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.