Huobi’s Ex-Compliance Officer Shares Insight on New York AG’s Crypto Exchange Report
Ex-General Counsel And Compliance Officer For Huobi US Talks About NY Attorney General’s Report
The former general counsel and compliance officer for crypto exchange Huobi recently spoke about the New York’s attorney general report on cryptocurrency exchanges.
During his tenure in Huobi US, Zhou helped set up the legal framework in New York for cryptocurrency exchanges, namely the application and regulations for the BitLicense. He represented Huobi for comments on the BitLicense proposal and is a leading expert on blockchain law and regulation.
Zhou gave his opinion on the overall impact the report could have on exchanges across the U.S., including efforts some exchanges are making to gain federal approval. Gaining federal approval for a banking charter would ease the cumbersome process of obtaining licenses as money transmitter businesses in each state.
Let us rewind back for a bit. The Virtual Markets Integrity Initiative report had drawn criticisms for its threats towards exchanges that declined to participate, even though they do not have operations in New York. Barbara Underwood, New York’s attorney general, called out non-participating exchanges such as Kraken in her virtual markets report. Still, Underwood has no jurisdiction outside of New York.
Even Zhou is agreeable to the fact that it was a strange move to threaten exchanges that do not operate in her jurisdiction. However, he stated, “Other state banking regulators will look at this report closely.”
He added: “Other state’s banking regulators are going to look at it closely. They will look at the claims brought up in the report, and see how they could also apply to exchanges operating out of their states. It won’t be ignored.”
Zhou believes that the report could be widely used to vet exchanges in each state. Though there’s no sign of this happening yet, there are already large entities that regulate state banking and dictates state bank charters.
According to Zhou, the disorder that each state has for banking charts causes a lot of headaches for U.S. exchanges.
Notably, the Office of the Comptroller of the Currency (OCC), the regulatory body that grants federal banking license, has already shown interest in the novel move of allowing fintech companies to receive the license. They notified that it would receive applications from fintech companies seeking a banking charter.
OCC’s charter known as regulatory “sandboxes,” and the application’s allegedly more lenient requirements, have drawn an objection from traditional banks. Banks feel disadvantaged by the National Banking Act regulations while an easier route to licensing is available to disruptive fintech companies.
Now, the New York State Department of Financial Services (NYDFS) has publicly rebuked the OCC’s decision to allow a special fintech charter. Zhou believes that a federal banking charter would be awarded ultimately.