New York and California, two of the largest homes to the United States’ digital currency and blockchain startups have been heavily criticized for their impractical and nonviable regulations towards startups offering bitcoin and cryptocurrency-related services. Ironically, it has been recently discovered that New York and California are so-called leading global fintech hubs of the world.
According to a report published by the World Economic Forum, New York and California just fell behind the United Kingdom in the global fintech hub rankings, securing the second and third spots in the world rankings.
The rankings were based on market size, investment, and fintech staff in the states or countries’ industries, in which all members of fintech startups and digital currency-related companies were recorded. In the investment and fintech staff criteria, California secured the top spot, with the state’s fintech startups securing nearly 4 times in investment compared to companies based in the UK.
Considering these statistics, California fintech startups and digital currency firms are starting to lead the state’s economy, attracting more investments than any other startups in other industries. If the growth of fintech and digital currency markets are fairly evident, what is encouraging California and New York to restrict and limit the development of innovative technologies and startups?
A major factor that could have pushed California and New York is their shallow understanding of digital currencies and misconception on digital currency startups as money transmitters. If the newly passed bill of the Californian lawmakers is analyzed, it is quite obvious that the government is attempting to create as much uncertainty regarding the legality of digital currency-related operations and services.
The reason behind such implementation of impractical laws and regulatory frameworks may most likely be the state’s desire to maintain control of the digital currency and bitcoin-related businesses. Thus, creating an enrollment scheme in which digital currency startups are forced to pay a fixed fee and comply to each request of the California state agencies as a core part of their enrollment.
New York has been executing a similar scheme as California, demanding startups to purchase BitLicense to operate as legal entities, which could cost up to hundreds of thousands of dollars depending on the size of the business.
Already, more than one third of the world’s blockchain and bitcoin startups have migrated to the UK and other startup friendly regions such as Germany. New York, California and other US states’ impractical regulations could push startups further away from the US to other regions across the world.