We believe New York State is about to lose a big opportunity. If made final, the current proposed rules for virtual currency proposed by New York’s Department of Financial Services would likely shut out New York residents and businesses from this new technology. We urge New York State to make serious changes to the proposal or risk being left behind.

The Department of Financial Services should simplify and remove the barriers that could kill innovation and economic growth in New York.

Around the country and the world, governments are realizing the nearly limitless potential that bitcoin and other digital currencies can bring to the table. States like North Carolina are introducing legislation to open the doors to the virtual currency industry, the thousands of jobs it brings, and the hundreds of millions of venture capital funding that are being poured into it. And just last week, the United Kingdom announced a sweeping proposal that would create an industry led regulatory sandbox that would allow innovation and economic growth to flourish. Not only that, the UK government itself is investing £10 million into virtual currency research to explore the benefits this new technology can bring to taxpayers, businesses, and governments.

But in New York, our nation’s financial hub, the story is different. The Department of Financial Services is proposing unprecedented rules that would make operating or using virtual currency in the state nearly impossible and would severely hinder financial tech innovation:

The rules would require some businesses to obtain two licenses for the same business, creating an expensive and burdensome environment that unfairly targets the virtual currency industry in favor of traditional financial institutions.

The rules don’t include a significantly flexible on-ramp for small startups to build and innovate their products, killing potentially disruptive technology before it can even start.

The rules would require information collection on customers that is unprecedented on the state level, with more invasive reporting and recordkeeping than that even required by the federal government. These requirements would fracture the nation’s well-established anti-money laundering regime making it nearly impossible for businesses to comply.

This all hurts the true innovators, the startups.

Please let Governor Cuomo, Superintendent Lawsky, and Chairwoman Robinson know that we don’t want New York left behind!

I propose 3 things:

1. I propose that we limit the information gathering to whatever is already required on a federal level. Why would New York State need more than what is already required of the companies on a federal level?

2. I propose we remove all the duplicate Federal and State regulations that will only double the burden and cost on the companies.

3. I propose a Sandbox of innovation in the financial markets. A place to test out products on a smaller group of people who understand the risks, in order to work out the kinks before they hit the mass market and need to burden of regulation.