Handbill
Harry Zhou, former general counsel and compliance officer for Huobi US, deal with with CCN about the latest report from New York’s attorney unspecific on cryptocurrency exchanges.
Zhou helped set up the legal framework in New York for cryptocurrency switches, namely the application and regulations for the BitLicense. He represented Huobi for comments on the BitLicense offer and is a leading expert on blockchain law and regulation.
Speaking with CCN, he discussed the comprehensive impact the report could have on exchanges across the U.S., including stabs some exchanges are making to gain federal approval. Gaining federal authorization for a banking charter would ease the cumbersome process of obtaining entitles as money transmitter businesses in each state.
OAG’s Report: Impact and Dispute
The Virtual Markets Integrity Initiative report, released Sept. 19, extracted criticism for its threats towards exchanges that declined to participate, all the same though they do not have operations in New York. Barbara Underwood, New York’s attorney broad, called out non-participating exchanges such as Kraken in her virtual markets bang. However, Underwood has no jurisdiction outside of New York.
Zhou agreed that it was a unaccountable move to threaten exchanges that do not operate in her jurisdiction. However, he averred, “Other state banking regulators will look at this communication closely.”
He continued:
“Other state’s banking regulators are going to look at it closely. They discretion look at the claims brought up in the report, and see how they could also attend to exchanges operating out of their states. It won’t be ignored.”
State regulators purpose not throw out the OAG’s otherwise detailed report, as it has been in much of the crypto-spheres (Kraken CEO Jesse Powell has some of the most colorful effects). Zhou believes that the report could be widely used to vet barters in each state. Though there’s no sign of this happening yet, there are already open-handed entities that regulate state banking and dictates state bank leases.
Trumping State Regulations with a Federal Banking License
The mishmash that each state has for banking charts causes a lot of headaches for U.S. interchanges, according to Zhou, who keeps a close eye on the developments between exchanges and regulators.
The figuring out that exchanges are attempting is to gain a federal banking license. Switches have more reasons to obtain a federal license now that a distinct state’s attorney general can turn sour toward cryptocurrency. This transfer translate to approval to operate nationally. Though the requirements and oversight are sundry stringent for federal banking charters, large exchange operators, such as Encircle, are considering filing applications, as CCN reported. One such drawback, according to Zhou, is that “the federal banking validate would mean that exchanges would need to hold much diverse capital in reserve.”
This reserve requirement might actually be a genuine thing for cryptocurrency investors, though, as it could bring extra peacefulness of mind for those who worry about the solvency of their exchange.
The Corporation of the Comptroller of the Currency (OCC), the regulatory body that grants federal banking sanction, has already shown interest in the novel move of allowing fintech circles to receive the license. As a bureau of the Department of Treasury, the OCC announced that it would experience applications from fintech companies seeking a banking charter.
The OCC’s major charter, known as regulatory “sandboxes,” and the application’s allegedly more magnanimous requirements, have drawn criticism from traditional, brick-and-mortar banks. Banks crave disadvantaged by the National Banking Act regulations while an easier route to commission is available to disruptive fintech companies. Coincidentally, the New York State Hang on of Financial Services (NYDFS) has publicly rebuked the OCC’s decision to allow a exceptional fintech charter.
Zhou believes that a federal banking charter liking be granted eventually. It won’t be a matter of “if” but “when,” he said.
Images from Shutterstock
Heed us on Telegram or subscribe to our newsletter here.
• Join CCN’s crypto community for $9.99 per month, click here.
• Longing exclusive analysis and crypto insights from Hacked.com? Click here.
• Bare Positions at CCN: Full Time and Part Time Journalists Wanted.