When New York’s Superintendent of Financial Services first encountered Bitcoin, he evidently thought it was a way to build his reputation as a hangin’ superintendent of financial services. (Doesn’t quite roll off the tongue like “hangin’ judge,” does it…) He sent subpoenas to everyone in the Bitcoin world and went on TV talking about “narcoterrorists.” That was foolishness.
Unfortunately, he also hatched the idea of creating a thing called a “BitLicense” for firms wanting to provide Bitcoin-based financial services in New York. That program is now hanging like an albatross around his neck.
I know nothing of the details, but a couple of decades in public policy make the probable outlines of what happened pretty clear. The press seized on the “BitLicense” idea. Lobbyists and business people came around to fawn over the “BitLicense” idea with Superintendent Lawsky, each hoping not to get cut too deeply by its inartful sharp edges. And Lawsky, having come around to favoring Bitcoin (it’s fairly evident from his speeches) found himself committed to coming up with this “BitLicense” thing.
When the first draft came out in July of last year, it was pretty universally panned. The Bitcoin community savaged it. Bitcoin businesses said they would not do business in New York. The idea of a second round of proposal and comment was quickly on offer.
But the second draft isn’t that much better. When comments close at the end of this week (how to comment), the “BitLicense” will again have received strong criticism. There’s always that contingent whose stock in trade is always—always—to play ball. And to others the “BitLicense” saga has gotten boring…
But the outcome is very probably set. In order to avoid backtracking, which would look foolish, the Department of Financial Services will probably continue forward on the errant path of creating a peculiar special license for Bitcoin-based financial services providers in New York.