Money 20/20: An Analysis of Superintendent Lawsky’s Speech to the Congregation


Superintendent Benjamin Lawsky of the New York Department of Financial Services (NYDFS) attended Money 20/20 to give a much anticipated speech concerning cryptocurrency regulation within New York State. This article will examine the ramifications of what he had to say.

Benjamin Lawsky

Lawsky is the current Superintendent of Financial Services at NYDFS, the organization that regulates banks and money service businesses within the state of New York. Aged only 44 he has had something of an illustrious public service career. Lawsky grew up in Pittsburgh and moved to Colombia to study law. He served as a councillor in Washington for several years before becoming assistant US Attorney in New York. He was elected to his current position in 2011.

Lawsky first came to the cryptocurrency community’s attention when he chaired the infamous Bitcoin Hearings in New York following the collapse of Silk Road. While some of his colleagues seemed quite dismissive of the cryptocurrency concept, he won some praise amongst the community for his willingness to listen and obvious interest in the technology.

Lawsky has come a long way since then, he has been holding meetings with various cryptocurrency players, and even regularly takes to Reddit to personally communicate with members of the cryptocurrency community. He says that this is so he can direct the writing of cryptocurrency regulation properly. He has clearly been doing his homework which is evidenced by his new depth of knowledge concerning blockchain technology that comes across in his Money 20/20 speech.

Aspects of Lawsky’s speech concerning NYDFS remit

Lawsky begins his address by explaining that cryptocurrency came to the attention of the NYDFS because it is believed some cryptocurrency firms fall under the definition of money transmitter. He also gives examples of money laundering and criminal activity such as Liberty Reserve and Silk Road in support of the need for regulation.

The media likes to use these cases as a way of demonizing cryptocurrency, when it is clear that the US dollar is the currency most used for money laundering, the drugs trade, and financing terrorism. To be fair to Lawsky he does recognize this to a degree. Lawsky also recognizes the benefits of cryptocurrencies for technological innovation within the banking system: “to be clear…we think that virtual currencies matter and we are excited about the potential they hold to improve our system in various ways?. He emphasizes that regulation is necessary, but is careful to point out that DFS does not wish to “stifle a fledgling industry?.

Lawsky goes on to explain that it was the collapse of Mt.Gox that made the DFS bring forward the time frame for its regulatory draft which was originally supposed to take 6 months longer. He says that the effect of Mt.Gox on consumers is precisely why regulation should exist. These kinds of sentiments may bring doubtful looks to the faces of many cryptocurrency old hands, but in fairness to Lawsky, his office was inundated with calls about Mt.Gox asking how users could get their money back. In that sense, some of the cryptocurrency community must bear part responsibility for the federal clampdown; if traders lose money and whine about it to the authorities, they can’t then complain when those authorities move to impose regulations.

Lawsky states that the goal of his proposed regulation is to “safeguard customer assets, protect consumers from fraud, root out money laundering, and emphasize the need for cyber security?. He believes that a final regulatory draft should be completed by January.

Lawsky is careful to talk up the collaborative process between DFS and the cryptocurrency community in order to reassure them that the proposals are part of an ongoing dialogue and not an all or nothing? solution. Nevertheless he states that many of the original proposals put forth by the DFS will be kept despite negative feedback. He suggests that much of the regulation will be similar to that already imposed up ordinary financial institutions with some allowances made for the unique nature of cryptocurrency. An interesting point is that Lawsky thinks the cybersecurity sections of the Bitcoin regulations will also be imposed upon traditional institutions.

The dreaded Bitlicense

Lawsky covers the much maligned Bitlicense, which has perhaps been the most criticized of his constructions. He addresses a few points that have caused much concern in the community. The first point cleared up is that the Bitlicense will not be required for software users or software developers, which many should find relieving. Secondly, it will not be required for individual cryptocurrency users who wish to make purchases or hold cryptocurrency for investment. Thirdly, miners and mining pools will not be regulated at all, which will be much appreciated by the community.

Costs of compliance and the Bitlicense-lite

Lawsky goes on to address fears about the costs of compliance for startup companies which he states he has listened to and agrees that compliance costs could be unnecessarily prohibitive. As a way to address this problem he is considering a so-called transitional BitLicense that would offer a much looser and less costly regulatory framework for a trial period while new companies get themselves going. The granting of such a license would be based on various factors such as the applicant’s scope and the risk level the present to consumers. Lawsky is also considering appointing a special panel of advisors to specifically deal with startups. These moves should take some pressure of smaller companies, but we must still wonder how light the burden will be.


Lawsky ends his speech with a monologue about how his department is doing good work, he then proceeds to take questions from the audience for some time, almost all of which he answers eloquently and knowledgeably.

We all want to hate him, but it must be said that Lawsky is a likeable guy, for a fed. He plays the good cop role well and seems to enjoy himself at these conferences. That is not to say he is a pushover, he clearly isn’t, having successfully fought for prosecutions against individuals hiding behind the corporate veil on Wall Street. However, he seems far more amenable to the cryptocurrency scene and ethos than many of his more old school colleagues, and the community could do far worse than having him in charge of writing New York regulation.

Regulations will come whether we like it or not and at least the NYDFS are willing to engage with industry in drawing them up. There are many positives to take from the speech such as the absence of regulation for miners, mining pools and individuals, along with the transitional Bitlicense. Lawsky is somewhat correct in saying that many will welcome at least some protections against outright scam exchanges and the like.

However, there is always the fear that once regulations are in place the NYDFS may overreach its boundaries and forget its commitments to startup companies and individuals. There is no obvious sign that this will happen, but the cryptocurrency community will be understandably suspicious when they consider the actions of other US government organizations and while Lawsky may be amiable enough, he won’t be in the role forever.

It is also of concern that the BitLicense will only apply to New York, with different or perhaps no regulatory framework applied to other parts of the US and the world. Lawsky didn’t seem to have a satisfactory answer for how this will work in practice, but what it may mean is cryptocurrency businesses simply avoiding New York altogether.


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