Politicians, regulators, and other public officials are rarely resolute enough to admit they made a mistake in their governance. Also, chastising another department is generally taboo, unless you are in Washington. The state of New York spent 2015 watching Bitcoin-related businesses flee the regulatory “House of Horrors” Ben Lawsky created before running off to California to start his private firm. Some have compared him to a child who comes over to your house, beats your dog, breaks the coffee table, and leaves. Well, it would seem the state’s Attorney General is ready to mend some fences and welcome some digital currency businesses back to The Big Apple with a new initiative.
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Eric Schneiderman, in association with Fordham University, the New York Corporation Council, the Cardozo Law Tech Startup Clinic and the Brooklyn Law Incubator and Policy Clinic, is looking to attract tech startups instead of driving them into the Lincoln Tunnel for greener pastures. New companies that are struggling to navigate the massive regulatory nature of the state will get free assistance on how to be compliant while staying in New York.
“This collaboration will not only help new companies navigate our regulatory system,” Schneiderman says. “It will also help provide insight to the state and the city about outdated or overly cumbersome rules, as well as about trends and needs in this rapidly growing sector of New York’s economy.”
New York may have spent 2015 showing how little respect it had for Bitcoin-related businesses, but there are signs of real progress. Take Mikey Costa, founder of AtlasCard, a new Bitcoin debit card he is developing. Costa found that another company was using the name and needed legal counsel at an affordable price to continue development. The Cardozo Clinic drafted a legal letter that got the other company to change their name, and Costa to continue.
“This other startup had raised ten times the money I had and had already spent tens of thousands of dollars in brand consulting,” Costa tells ABA Journal. “Winning this battle was huge for me and allowed me to continue to focus on building my business and product.”
Schneiderman, who has been the state’s Attorney General since 2011, sees that New York laws are not tech-friendly, and need updating to be competitive with other business meccas like London. The United Kingdom stepped forward in 2015 to court Bitcoin businesses worldwide, dedicated to improving regulations and preventing fraud in the niche. New York state laws were not designed with tech startups in mind, many of which are not going to take physical residence in New York, but operate there.
“While the initiative is just getting underway, we believe it will provide a great opportunity to identify laws that inhibit innovation,” says Julie Samuels, executive director of Engine, a tech startup advocacy organization. “There certainly are no shortage of outdated regulations that affect startups.”
History has shown that poor regulatory structure and practices can destroy a nation, much less a state, forcing innovators to find freedom elsewhere. Take the advent of the automobile. Britain’s infamous “Red Flag Laws” late in the 19th century forced car owners to have an engineer on board at all times, and a “Flag man” running ahead to warn pedestrians of the impending doom of the combustion engine coming towards them. Such onerous state laws forced the early automobile to Germany and the Unites States, and the British auto industry has never been the same.
The U.K. was the global leader in the car industry at the time, but instead decided to drive cars literally out of the country, much to the glee of other markets. They took the bait from the lobbyists of the horse-and-carriage industry instead of doing what was right for the country. Is this what happened last year? Did the incumbents in New York’s financial sector descend upon New York regulators to remove Bitcoin from the scene, protecting them from some real competition? I’ll let you decide.
Is New York ever going to be Silicon Valley or London when it comes to digital currency? Probably not, but a journey of 1000 miles begins with a single step.