BY BENJAMIN FANG
With the rise and fall of Bitcoin and other cryptocurrencies constantly occupying national headlines, members in the state Assembly want to further study the issue.
Assemblyman Clyde Vanel, chairman of the Assembly’s Subcommittee on Internet and New Technology, is leading that charge.
The southeast Queens lawmaker, a pilot and attorney by trade who also studied engineering in college, called for a task force to determine the effects of regulation and other state policies on the digital payment system.
“Things are changing fast and we have to understand it,” he said. “In New York, we can hopefully steer where the policy can go.”
In a visit to the Queens Chamber of Commerce’s Technology Committee on February 15, Vanel delved into a brief history of cryptocurrency, the blockchain technology it runs on, and how these new developments can impact New York.
The idea first circulated in 2008, when an anonymous person or people named Satoshi Nakamoto wrote a document that proposed a new peer-to-peer cashless money system. According to Vanel, Nakamoto, whose identity is still unknown, solved a trust issue that had hindered previous attempts at creating a digital currency.
That was a problem at that time because the markets had just crashed, and the recession had created distrust in central authorities and government, Vanel said. Unlike the traditional money system that relies on banks, Bitcoin used a new concept called blockchain technology that helped verify peer-to-peer transactions.
Vanel described the technology as creating a “distributive ledger” that relies on computers solving an algorithm to ensure online transactions are legitimate and allowed.
Blockchain technology can be used for many purposes, including keeping records and protecting data. Vanel cited the 2016 presidential primary in New York, when the voting records of 127,000 Brooklynites were purged from the system.
He also gave the example of the recent information breach with Equifax, in which the information for 145 million people was stolen and misappropriated by cyber criminals. In those cases, blockchain technology could have been used to better protect and store information.
With new technology forming and changing daily, governments are tasked with studying, understanding and ultimately regulating it. Vanel said in 2015, the state’s Department of Financial Services implemented a new regulation called BitLicense. In order to operate a cryptocurrency business in New York, owners have to apply for the license.
Though the license contains only a $5,000 fee, the assemblyman acknowledged that companies pay upwards of $100,000 on average due to the complicated regulatory process. As a result, only three or four companies have obtained the license.
“We make it difficult for people to get involved in cryptocurrency in New York,” Vanel said.
Vanel said different states and even the federal government have different relationships with cryptocurrency, and there’s little to no middle ground. Some states don’t trust the new technology and want to shut it down. Others welcome it with “open skies.”
“What I believe is, it’s important for New York to get it right,” he said. “We’re at a crossroads and at a time where things are dynamic, things are changing. It’s uncomfortable when things are changing.”