Can Regulators Ever Keep Up With Crypto Markets?

The New York State Department of Financial Services (NYDFS) is setting out to tackle a massive regulatory object: How crypto exchanges like Coinbase, Gemini and others list – and perhaps more importantly, delist – tokens. According to a new public service announcement, the call to update the agency’s guidance builds upon and will try to formalize existing working standards.

But the move is much more than just government incrementalism, and could have nationwide and even global implications.

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My colleague Jack Schickler does a good job breaking down today’s announcements. In short, the agency laid out three aims: set policy so NYDFS licensees are more proactive in assessing legal, reputational and market risks during the coin listing process, update the number of “greenlisted” coins (today limited to bitcoin, ether and stablecoins from PayPal and Gemini) and open a public comment period for industry participants to say their piece.

While “just” a state financial regulator, whatever the NYDFS does often makes an imprint worldwide. Even in an increasingly globalized world, New York remains a main hub for economic activity and capital formation, and so the agency is a leading organization in setting reporting and communication standards that echo across the financial landscape. If you can make it here, you can make it anywhere.

So too for crypto, in an interesting way and despite The Blockchain’s globalized nature (some might say “geographical decentralization,” but you don’t have to). Take just the NYDFS’ track record when bringing regulatory enforcements: a few of these cases have quite literally reshaped the industry, like in the case of Tether that reset the bar for stablecoin transparency.

It’s true the agency’s so-called BitLicense didn’t quite become the model for crypto oversight that its architect, the lawyer and former public servant Benjamin Lawsky, set out to achieve. But the collected bundle of rules, recommendations and guidance has been a major influence on the development of the digital asset industry in the U.S. – with many insiders thinking it set the pace for regulators to…