Casey Wagner

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Eric Adams is pulling a Donald Trump. Or he’s trying to, at least. That was my takeaway from the inaugural NYC Crypto Summit at Gracie Mansion last week.&nbsp;



Adams — New York’s controversial, no-longer-federally-indicted mayor — hasn’t talked about crypto much since taking office in 2022.



Adams promised on the campaign trail to take his first three paychecks in bitcoin. When the city’s Treasury department <a href="https://www.nyc.gov/office-of-the-mayor/news/041-22/mayor-adams-receive-first-paycheck-cryptocurrency">couldn’t make this happen</a>, he opted to buy BTC and ETH himself on payday.



For the last several years, the War on Rats has been the Adams administration’s main focus. But last month, city officials announced the Crypto Summit — a press conference followed by private roundtable discussions with industry executives and city officials.&nbsp;



The purpose, Adams said, was to come up with new ways the city can leverage crypto and blockchain technology to create jobs, improve operations and expand access to financial services. The event was complete with speeches from Tether co-founder Brock Pierce and Bitcoin Center creator Nick Spanos. There was also an open bar starting at 2 pm.&nbsp;



Spanos (and most of the people at the roundtable, I’m told) is primarily interested in <a href="https://blockworks.co/news/comptroller-audits-nydfs-bitlicense">abolishing the BitLicense</a>, the Department of Financial Services-issued business license digital asset companies need to operate in the state. The fact that the mayor of New York City does not have the authority to nix the BitLicense was not mentioned.&nbsp;



After a couple hours of roundtable discussion, the party moved outside. Hundreds of guests donning attire falling somewhere between “boardroom and ballroom,” per an attendee I spoke with, gathered under a tent in Gracie Mansion’s backyard for a post-summit reception. Several other attendees told me they only came to get a look inside the famous house.&nbsp;



It doesn’t take an experienced political strategist to gather that Adams is probably looking for money. His first words to the crowd on Tuesday were literally “I smell money.”&nbsp;



He’s running for re-election — this time as an independent — and his competition already has amassed <a href="https://www.nytimes.com/interactive/2025/05/06/nyregion/nyc-mayor-funding-neighborhood-donations.html">big budgets</a>. We all saw what crypto industry donations did for Trump’s campaign. I imagine Adams has been taking notes.&nbsp;



That doesn’t necessarily mean we won’t or can’t see New York crypto policy evolve, and who knows what the new advisory council will come up with. But for now, I’m not holding my breath.



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BitLicense

Eric Adams crypto summit features all-day open bar and BitLicense criticism

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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As we approach what will undoubtedly be a new era for federal crypto regulation, this state watchdog head has some advice for companies: Start engaging now.&nbsp;



“Never surprise your regulator,” New York Department of Financial Services Superintendent Adrienne Harris said at the Blockchain Association Policy Summit earlier this month.&nbsp;



“We are by nature risk-adverse people,&#8221; she added. &#8220;We don’t like to be surprised, so come in and talk to us proactively.” 



Waiting until there is already an enforcement action underway to meet with regulators is a mistake, Harris said. Companies should be having these conversations before they even file applications, she added.&nbsp;



The comments come as New York continues to be a leader in state-level regulation. It was the first state to design a <a href="https://blockworks.co/news/comptroller-audits-nydfs-bitlicense">“BitLicense” program</a> in 2014. The policy, which requires businesses conducting digital asset activities to <a href="https://blockworks.co/news/ny-authorities-more-fees-crypto-companies">register</a> with the DFS, came into effect the following year.&nbsp;



“Foreign jurisdictions and Congress have been for the last several years really borrowing from the New York framework as now it&#8217;s the gold standard,” Harris said.&nbsp;



New York’s BitLicense may have been received poorly by the industry at first (at least 10 companies initially left the state when the regulations were announced), but the regulatory framework shows the DFS is committed to allowing investors to access the markets they want, Harris said.&nbsp;



“It&#8217;s not our job as a regulator to decide what the market wants or doesn&#8217;t want, right? These instruments are here,” she added. “This technology is here. It&#8217;s our job to protect consumers, protect markets and ensure responsible growth in the industry.”&nbsp;



While President-elect Donald Trump has not commented on whether he would grant more authority to states to oversee the crypto industry, his administration’s efforts to shrink the size of several federal agencies, including the SEC, could ultimately have that effect.



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New York continues to lead on state crypto regulations 

James Cirrone

The New York Department of Financial Services (DFS) issued new regulation for BitLicense holders that will change how supervision costs are assessed.



The regulation will give the department new authority “to collect supervisory costs from licensed virtual currency businesses” under a provision in New York’s fiscal year 2023 budget, according to the <a href="https://dfs.ny.gov/reports_and_publications/press_releases/pr202304171">press release</a>.



As of 2020, just 25 companies held a BitLicense, including Circle, Coinbase, Ripple and Square. Blockworks also reported that the costs associated with obtaining the license can be <a href="https://blockworks.co/news/ny-wants-crypto-startups-to-pay-5-times-per-year-for-bitlicense">upwards of $100,000</a>, per the Capital Fund Law Group. 



DFS Superintendent Adrienne Harris touted New York’s regulatory framework for digital assets and said her office has its eyes on the future developments in virtual currency.



“This regulation provides the Department with additional tools and resources to regulate the virtual currency industry now and in the future as innovators create new products and use cases for digital assets,” Harris said in a statement.&nbsp;



BitLicense holders will be billed five times in fiscal year 2023-2024 with four quarterly assessments throughout the year “based on the Virtual Currency Unit’s estimated annual budget at the time of the billing,” according to the <a href="https://www.dfs.ny.gov/apps_and_licensing/virtual_currency/annual_assessment_charges_bitlicense">DFS website</a>. Then there will be a final assessment at the end of the year based on the unit’s actual expenses.



DFS also said it will require crypto firms to “meet rigorous standards for capitalization, cybersecurity protection, and anti-money laundering protocols, among other requirements.” This is similar to how <a href="https://blockworks.co/news/ny-wants-crypto-startups-to-pay-5-times-per-year-for-bitlicense">banks and insurance companies are regulated</a>.



The BitLicense was first issued in 2015 and requires crypto startups to pay state regulators for the enforcement they carry out. This latest regulation intends to reinforce those foundations. The DFS stated in its announcement that it “will allow the Department to continue adding top talent to its virtual currency team to continue efficient and effective regulatory oversight.”



New York State’s DFS has been actively on the hunt for crypto firms falling afoul of the law. On April 14, bitcoin payment service provider <a href="https://blockworks.co/news/bitpay-fine-new-york-regulator">BitPay agreed to pay the regulator $1 million</a> after failing to comply with anti-money laundering laws and cybersecurity regulations.



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NY Authorities To Collect More Fees From Crypto Companies

Ben Strack

New Jersey is looking to follow in New York’s footsteps by establishing a crypto regulatory framework&nbsp; — a move other states may also look to replicate in the absence of federal rule-making.&nbsp;



Crypto companies fled from New York to New Jersey after the New York Department of Financial Services (NYDFS) created BitLicense requirements in 2015.



The proposed Digital Asset and Blockchain Technology Act in New Jersey would be similarly expansive, which could catalyze firms in the segment to move again — or force them to comply on the heels of 12 or so months of events that shook the industry.



The <a href="https://legiscan.com/NJ/text/A2371/id/2655313" target="_blank" rel="noreferrer noopener">bill</a> was introduced in February 2022 and most recently amended last month.



Christopher Gerold — a crypto attorney at law firm Lowenstein Sandler and former chief of the New Jersey Bureau of Securities — told Blockworks that the proposed legislation is, at least in some ways, more comprehensive than New York’s blueprint.&nbsp;



It goes a step further, according to Gerold, by attempting to address custody concerns emanating from recent allegations of crypto fraud, as well as the bankruptcies of the likes of <a href="https://blockworks.co/news/celsius-selects-novawulf-to-help-felled-lender-navigate-bankruptcy">Celsius</a>, <a href="https://blockworks.co/news/whats-next-for-ftx-and-its-customers-after-bankruptcy-filing">FTX</a> and <a href="https://blockworks.co/news/blockfi-files-for-bankruptcy">BlockFi</a>.



A licensee offering digital assets custody must maintain “an amount of each type of digital assets sufficient to satisfy the aggregate entitlements of the persons to the type of digital asset,” the proposed bill states.



John Olsen, New York state lead at the crypto lobbyist Blockchain Association, told Blockworks the “breadth” of what the New Jersey bill considers “digital asset business activity” would mean many — if not all — businesses with digital asset dealings would need to get a license.&nbsp;&nbsp;



“This would have a far-reaching impact that would send small- and medium-sized blockchain businesses packing rather than obtain a costly and burdensome license,” Olsen said in a statement. “Businesses outside of [New Jersey] that currently engage with [state] residents would be forced to firewall their services from those residents or obtain a license.&#8221;



Olsen said the bill has a good chance of passing the state senate this year.&nbsp;



“If we aren’t able to spark a constructive dialogue, we are concerned this legislation, as is, would effectively shut down this growing industry in the state,” he said.



<h2 class="wp-block-heading">New Jersey’s past actions against crypto companies</h2>



Gerold is no stranger to trying to regulate the industry.



He recalled his mother — not a sophisticated investor — asking him in November 2017 if she should invest in bitcoin. By the following month, bitcoin’s price had risen sharply.&nbsp;



“My mother said, &#8216;Chris, everyone’s getting rich on this bitcoin; I feel like I should be buying some,&#8217;” he said. 



Added Gerold: “And that’s when I realized we have a problem here, because you have retail investors not understanding how it works, but they’re thinking about investing in it.”



In January 2018, Texas ordered BitConnect to halt several of its investment programs. A federal grand jury in San Diego later <a href="https://www.justice.gov/opa/pr/bitconnect-founder-indicted-global-24-billion-cryptocurrency-scheme" target="_blank" rel="noreferrer noopener">charged</a> its founder with orchestrating a global Ponzi scheme.



From there, the New Jersey Bureau of Securities, with Gerold at the helm, began taking action.&nbsp;



The agency’s first crypto-related cease and desist <a href="https://www.njconsumeraffairs.gov/Actions/BitcoiinLowerCase_CD_7MAR18.pdf" target="_blank" rel="noreferrer noopener">order</a> came in March 2018 against Bitcoiin, a Steven Seagal-endorsed initial coin offering (ICO) that the Bureau of Securities said was “fraudulently offering unregistered securities.”  



The bureau spent much of that year investigating the thousands of websites touting ICOs — many of which were fraudulent, Gerold said. And issuing more cease and desist orders.



In 2021, Gerold’s agency began going after companies offering interest-earning crypto accounts — deciding they were securities. It ordered Jersey City-based BlockFi and Celsius of Hoboken, NJ, to stop selling such products in July and September of 2021, respectively.&nbsp;



Both companies, both based just west of Manhattan, went bankrupt last year.&nbsp;



“To the credit of the states at the time…we decided there needed to be some guardrails, they needed to come into compliance with the securities laws and they had to register these products if they were going to sell them,” Gerold said. “Ultimately, the states were right.”



Keep reading for more excerpts of Blockworks’ interview with Gerold.



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Blockworks: How does this proposed New Jersey framework differ from the New York BitLicense regulations?



Gerold: This bill was originally set to be housed with the Department of Banking and Insurance, and now they’ve switched it to the Bureau of Securities, which is in the division of consumer affairs within the department of law and public safety. So, it has a much more consumer-protection slant than it did prior.



(Virtual currency licensees in New York are regulated by its Department of Financial Services.)



There are pretty significant custody requirements. These are put in there to address the recent issues that have emerged with the various bankruptcies, and with [the crash of] Terra’s stablecoin.



It attempts to address these [situations]. Is it the best way? It’s questionable, but it does address them, and that’s a significant deviation from New York’s BitLicense.



Blockworks: With New York’s framework and this proposed bill in New Jersey, what might other states be waiting for?



Gerold: I think it’s a lack of understanding of the product and the way it works. And, until now, the lack of a crisis.



Up until the last year, or eight months, everything was kind of humming along. People hadn’t lost significant amounts and it hadn’t impacted residents in a given jurisdiction negatively in mass, which now it has.



There was just a lack of understanding of the industry and how it worked to be able to craft legislation around it. Now I think the temperature has changed. People understand it more — average people who are not immersed in the tech industry. And I think now we’re going to see more regulation at the state level.



Blockworks: Do you expect to see crypto regulation at the federal level? If so, when?



Gerold: Some say we’re never going to see it. I’m of the opinion that we see regulation after a crisis, and so the question is, ‘Is this a big enough crisis for them to pass regulations at the federal level?’



I thought it was, but the further we get away from what we’ve seen over the last six months, the less likely it is. Everyone has a different opinion on how it should be regulated, and that’s presenting a log-jam of ideas.&nbsp;



I do think we’re going to see some. I’m not sure it’s going to be this year.



For the last couple years we’ve heard the CFTC and the SEC say — in not so many words — that they needed the law tweaked or changed to give them more authority. But now, with the crisis, the SEC has filed cases. The CFTC has filed cases. And. I guess the question is, &#8220;Do they need more authority?&#8221;



If [the SEC or CFTC] wanted to go that route, where if you’re an exchange you need to be registered with them…that’s still an open question. But I think states are going to start filling that void, like New Jersey is and New York has.



This interview has been edited for brevity and clarity.



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How New Jersey’s Crypto Bill Could Impact Industry Firms in the State

Shalini Nagarajan

Crypto companies in New York could find themselves regularly paying to be regulated under the BitLicense scheme — just like banking and insurance firms do.



The New York State Department of Financial Services (DFS) is welcoming feedback on a proposal that would demand BitLicense holders consistently pony up to regulators, with bills due five times a year scaled to the size of the company.



Under the new rules, DFS would conduct four quarterly assessments before a final assessment, each with their own fees. Back in April, the New York State Senate’s budget granted DFS the <a href="https://www.protocol.com/bulletins/new-york-dfs-bitlicense-cost" target="_blank" rel="noreferrer noopener">authority to charge crypto companies</a> for supervisory costs.



DFS Superintendent Adrienne Harris, at the head of the proposal, said the regulation provides for transparent and timely rules to ensure consumer protection and root out financial crimes in the space.



“The ability to collect supervisory costs will help the department continue protecting consumers and ensuring the safety and soundness of this industry,” she said in a <a href="https://www.dfs.ny.gov/reports_and_publications/press_releases/pr20221211" target="_blank" rel="noreferrer noopener">statement</a>. 



Harris added that the supervisory costs will allow the department to “continue adding top talent” to its virtual currency regulatory team.



No benchmarks were given for amounts BitLicense holders would have to pay, but the department’s total operating expenses on oversight would ultimately dictate fees owed. Firms face penalties such as late fees, suspension or license termination if bills aren’t paid within 30 days.



The proposal will now be subject to a 10-day comment period, followed by a 60-day waiting period upon publication in the state government’s official register.



<h3 class="wp-block-heading">BitLicense saved New York from SBF and FTX</h3>



New York’s DFS is looking to align its crypto regulation with the finance and investment sectors, as there was no provision for consistent payments when BitLicenses were first adopted in 2015.



BitLicense was the first US state framework for crypto. Any digital asset company operating in New York or managing investments from New Yorkers, such as in a fund, must obtain a BitLicense.



Costs associated with a successful application, such as compliance and legal fees, have been <a href="https://www.capitalfundlaw.com/blog/newyorkbitlicense" target="_blank" rel="noreferrer noopener">pegged to cost</a> more than $100,000, per Capital Fund Law Group. A state superintendent inspects companies for multiple factors such as total assets and liabilities, liquidity positions and amounts of leverage employed.



BitLicense costs are often labeled prohibitive, with many crypto firms simply opting to stay out of New York altogether. While the number of crypto startups worldwide range in the thousands, just 25 companies had <a href="https://www.coindesk.com/policy/2020/06/24/bitlicense-recipients/" target="_blank" rel="noreferrer noopener">received</a> a BitLicense as of 2020, including Circle, Coinbase, Ripple and Square, as well as struggling crypto brokerage unit <a href="https://blockworks.co/news/genesis-halts-lending" target="_blank" rel="noreferrer noopener">Genesis</a>.



Only a handful of firms have received one since. FTX US, the local arm of Sam Bankman-Fried’s crumpled crypto empire, notably never received a BitLicense, instead opting to <a href="https://www.coindesk.com/business/2022/05/11/ftx-us-reveals-new-york-trust-charter-application/" target="_blank" rel="noreferrer noopener">apply</a> for a trust charter earlier this year, a move which appeared to have gotten nowhere.



This meant New Yorkers were restricted from (legally) accessing FTX US and its native token FTT. Up to a million FTX users around the world are believed to have lost funds with the defunct exchange.&nbsp;



In many states, companies that process cash or bitcoin and other crypto payments are required to show they have sufficient money to protect consumers if things get faulty.&nbsp;



But Wyoming and Texas are regarded as far more crypto-friendly than New York. According to <a href="https://slate.com/technology/2021/06/wyoming-cryptocurrency-laws.html" target="_blank" rel="noreferrer noopener">Slate</a>, at least 24 related laws have passed in Wyoming, with some aimed at encouraging bitcoin mining firms with cheap energy prices.&nbsp;



One <a href="https://www.natlawreview.com/article/wyoming-moving-to-exempt-virtual-currency-its-money-transmitter-law" target="_blank" rel="noreferrer noopener">Wyoming law</a> makes crypto transactions exempt from money transmitter regulations. Others ensure crypto transactions are <a href="https://media.consensys.net/what-wyomings-13-new-crypto-laws-mean-for-blockchain-in-the-us-1bcf8b7a39d4" target="_blank" rel="noreferrer noopener">free of state tax</a>, including sales and property tax. Texas, Nevada and North Dakota have passed similar bills.



As for New York, it’s already common practice for the DFS to charge other licensed financial institutions for oversight in the state, so its proposal is not unusual.



Although, the prospect of hitting up crypto firms for cash every few months — in the midst of a brutal bear market — has to sting.



David Canellis contributed reporting.



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