Will Incoming York’s new mayor make the city a bitcoin hotspot?

 Will Incoming York’s new mayor make the city a bitcoin hotspot?

With cities like Miami and Austin courting digital asset firms, John Wu was undecided about relocating his bitcoin and blockchain start-up Ava Labs to New York – until Eric Adams was elected mayor last year.

The election of Adams, a Bitcoin enthusiast who has promised to convert New York City into a crypto hub, played “a huge influence” in Wu’s decision to open a permanent office in the city in November, according to Wu.

“Knowing that we have a sympathetic government, especially in the New York City area, will be very helpful,” said Wu, the company’s president.

Adams, who was sworn in earlier this month, has a lot of work ahead of him to make New York as friendly as other potential crypto centres.

The state of New York has strict restrictions for cryptocurrency enterprises, including an expensive registration requirement, and the state attorney general is cracking down on some companies in the field.

Nonetheless, Wu and other cryptocurrency executives believe the mayor’s welcoming attitude would attract digital asset start-ups eager to establish their legitimacy alongside traditional Wall Street firms and leverage the financial hub’s large talent pool and investor base.

Chainalysis, a bitcoin data platform, has also committed to expanding its presence in New York in 2021, signing a lease in August for a Manhattan office space that can house up to 200 employees.

“The incoming mayor’s support for the industry enhances my belief that New York is the greatest home for Chainalysis’ headquarters,” Michael Gronager, Chainalysis’ chief executive and co-founder, said in a statement to Reuters.

“For our next phase of growth, we intend to tap into the city’s deep talent pool,” he added.

With the digital asset business rapidly expanding and the value of cryptocurrencies skyrocketing – exceeding $3 trillion in November – many states want a piece of the action.

During his candidacy, Adams stated his desire to create a digital wallet for city employees and users of public benefits. Following his victory, he promised to collect his first three paychecks in bitcoin and urged that cryptocurrencies and blockchain technologies be taught in New York schools.

New York City Mayor Eric Adams speaks at a news conference in Brooklyn, New York, on Tuesday, January 4, 2022.

“The bitcoin industry will be centered in New York City… Just sit tight! “In November, he tweeted.

Adams has yet to offer specific legislation that would encourage crypto companies to locate in New York, in contrast to other cities such as Miami and Austin, whose marketing has emphasised cheap energy prices and competitive tax rates.

The mayor’s office did not answer to a request for comment, but Adams has stated that he believes his crypto-friendly position will bring more tech talent to the city, and many executives agree.

“I think it’s a very good signaling tool to say, ‘Okay, we recognize that this industry can benefit everyone,'” said Zach Dexter, CEO of FTX US Derivatives, a Miami-based crypto derivatives exchange.

REGULATORY STUMBLING BLOCK?

It is uncertain if Adams will be able to work from City Hall to reshape state laws that the virtual currency sector has criticized as being unnecessarily stringent and expensive.

“He can be a cheerleader,” said Murphy & McGonigle attorney Stephen Gannon. “However, the majority of the regulatory environment is driven by the state.”

New York Attorney General Letitia James has shut down cryptocurrency lending sites, stating that they must register with her office in the same way that other lending platforms operating in the state or supplying products to New Yorkers do.

Most digital currency-related businesses in New York must also get a “BitLicense” and meet with know-your-customer, anti-money laundering, and capital regulations. Only 20 licenses have been granted by the New York Department of Financial Services (NYDFS), which did not reply to a request for comment.

“Adams’ statements give us more confidence,” said Haohan Xu, CEO of Apifiny, a digital asset trading network based in New York. “However, the BitLicense remains the primary focus for any crypto firms based in or seeking to establish themselves in New York City.”

While the BitLicense may be a barrier for some, Adams may be able to offset costs through other means, such as commercial tax benefits.

Former NYDFS innovation chief Matt Homer believes Adams could have some impact on state crypto rules, especially because Governor Kathy Hochul has committed to engage with him on commercial issues.

“I believe he has the ability to… make an impact on regulation,” said Homer, who is presently an executive in residence with venture capital firm Nyca Partners.

The office of Hochul did not respond to a request for comment.

COMPETITION

Other crypto-friendly states and localities will have to compete with New York. Colorado, for example, enacted legislation in 2019 exempting digital currencies from certain securities regulations. Wyoming has established a special purpose charter for cryptocurrency enterprises.

Miami Mayor Francis Suarez, with whom Adams has already formed a friendly rivalry on Twitter, is also pursuing cryptocurrency entrepreneurs, emphasizing cheaper taxes and living costs.

Given the sector’s rapid expansion, crypto executives believe there is opportunity for more than one city to emerge as a crypto destination. Dexter pointed out that New York has already been able to attract tech expertise from Silicon Valley, which may help Adams gain an advantage.

“There’s an opportunity to have a few crypto capitals,” Dexter explained.  “I think he’s going to have some success”