Encouraging rhetoric from incoming New York City Mayor Eric Adams is a welcome sign for cryptocurrency-related businesses looking to settle there.
Yet, despite these positive signs, some are asking whether he will have the power to effect more stringent regulations at the state level. Additionally, Adams faces competition from other American cities vying for a position to become the next crypto hub.
Companies encouraged
With limited, but distinct, places to choose from, cryptocurrency and blockchain start-up Ava Labs had been unsure about where to settle. However, company president John Wu said that Adams’ election had played “a big part” in his decision to set up in the Big Apple. “Knowing that we have an administration that’s friendly, especially in the New York City area, is going to be very helpful,” Wu said.
Doubling down on its choice of New York City, last year cryptocurrency data platform Chainalysis signed a lease for a Manhattan office space that accommodates up to 200 staff. “The new mayor’s support for the industry strengthens my conviction that New York is the best place for Chainalysis’s headquarters,” said co-founder and CEO Michael Gronager. “We plan to tap into the city’s deep talent pool for our next phase of growth.”
Regulatory effect?
Following his election, Adams came out in favor of cryptocurrencies, offering to receive his first three months’ pay in Bitcoin and suggesting that local schools educate students on cryptocurrency and blockchain technology. Adams had also expressed interest in developing a digital wallet for city employees and recipients of public benefits, which inspired CityCoins to make NYCCoin its next project.
Although he has yet to propose any specific policies that would offer a legitimate incentive for crypto companies to come, some believe his positive stance has already proven effective. “I think it’s a very effective signaling tool to… say, ‘Okay, we recognize that this industry can benefit everyone,’” said Zach Dexter, CEO of crypto derivatives exchange FTX U.S. Derivatives.
However, others are considering whether Adams, as a city leader, will be able to affect regulations operating at the state level, especially those at odds with his own appraisal. “He can be a cheerleader,” said Murphy & McGonigle attorney Stephen Gannon. “But mostly the regulatory environment is driven by the state.”
New York state has some of the most stringent requirements for crypto-related companies, including a “BitLicense” and compliance with know-your-customer, anti-money laundering, and capital regulations. Additionally, New York Attorney General Letitia James has said that such companies must register with her office before operating in the state or offering products to New Yorkers, having shuttered a pair that did not.
Despite these hurdles, some attest that Adams could subsidize such costs through other incentives, like commercial tax breaks. Former head of innovation at the New York Department of Financial Services (NYDFS) Matt Homer believes Adams “could potentially… have an influence on regulation,” as Governor Kathy Hochul had previously pledged to work with him on business issues.
Crypto competition
In light of these challenges, New York will have its work cut out for it in terms of crafting appealing incentives, which rival places have already started to do. For instance, Colorado passed a law in 2019 which exempts digital currencies from certain securities rules, while Wyoming created its own special purpose charter for crypto companies.
However, Miami stands out as the leading rival to New York City as a crypto hub thanks to the effort of its own crypto-enthusiast mayor, Francis Suarez. Touting lower taxes and living costs, as well as cheap renewable energy sources, Suarez even inspired a friendly rivalry with Adams’ with his championing of MiamiCoin. Ultimately, given the industry’s decentralized nature and surging growth, crypto executives believe that more than one city will emerge as a crypto hub in the United States.
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