Analysis: Crypto companies are betting that the new mayor will make New York a hub of digital assets

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Jan 12 (Reuters) – With American cities like Miami and Austin trying to woo digital asset companies, John Wu wasn’t sure whether to make New York City the permanent home of his cryptocurrency and blockchain start-up Ava Labs – until until Eric Adams was elected mayor in November.

Wu said the election of Adams, a bitcoin enthusiast who pledged to turn the Big Apple into a crypto hub, played “a major role” in his decision to create a permanent office in New York City in November.

“Knowing that we have a friendly administration, especially in the New York City area, will be very helpful,” said Wu, president of the company.

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Adams was sworn in this month and has a lot of work to do to make New York as welcoming as other would-be crypto hubs. The state of New York has strict regulations for cryptocurrency companies, including a costly licensing requirement, and the state’s attorney general is cracking down on some companies in the industry.

However, Wu and other cryptocurrency executives said the mayor’s friendly stance could attract digital asset start-ups eager to assert their legitimacy alongside traditional Wall Street firms and leverage the vast talent pool and base of financial center investors.

Chainalysis, a cryptocurrency data platform, also doubled its investments in New York City in 2021, signing a lease in August for an office space in Manhattan that will house up to 200 employees.

“The new mayor’s support for the industry reinforces my belief that New York is the best place for Chainalysis headquarters,” Michael Gronager, CEO and co-founder of Chainalysis, told Reuters. “We plan to tap into the city’s vast talent pool for our next phase of growth,” he added.

With the digital asset industry growing rapidly and the value of cryptocurrencies on the rise, which surpassed $ 3 trillion in November, many jurisdictions want a slice of the action.

During his campaign, Adams expressed interest in developing a digital wallet for city employees and public benefit recipients. After his election, he pledged to take his first three salaries in bitcoin and suggested that New York schools give courses on cryptocurrency and blockchain technology.

“NYC will be the center of the cryptocurrency industry … Wait!” he tweeted in November.

Adams has yet to propose specific policies that would give cryptocurrency companies an incentive to settle in New York, unlike other cities like Miami and Austin whose marketing highlighted their low energy costs and competitive tax rates.

The mayor’s office did not respond to a request for comment, but Adams said he hopes his crypto-friendly stance will attract more tech talent to the city, and many executives believe it will.

“I think it’s a very effective reporting tool for … saying, ‘Okay, we recognize this industry can benefit everyone,'” said Zach Dexter, chief executive officer of FTX US Derivatives, a based crypto derivatives exchange. in Miami.

REGULATORY ROAD BLOCK?

It is unclear whether Adams could work from City Hall to reshape state regulations that the virtual currency industry has called excessively stringent and expensive.

“He can be a cheerleader,” said Stephen Gannon, Murphy & McGonigle’s attorney. “But mostly the regulatory environment is state-driven.”

New York Attorney General Letitia James shut down cryptocurrency lending platforms, saying they need to register with his office just like other lending platforms that operate in the state or offer products to New Yorkers.

New York also requires most digital currency companies to obtain a “BitLicense” and comply with know-your-customer, anti-money laundering and capital requirements. The New York Department of Financial Services (NYDFS), which did not respond to a request for comment, only granted 20 licenses.

“Adams’ comments give us more confidence,” said Haohan Xu, CEO of New York-based digital asset trading network Apifiny. “However, for all crypto companies based or looking to be in New York, the focus is still on BitLicense.”

While BitLicense is a stumbling block for some, Adams could offset the costs through other incentives, such as commercial tax breaks.

Matt Homer, the former chief of innovation at NYDFS, said Adams may have some influence on state crypto rules, especially since Governor Kathy Hochul has pledged to work with him on commercial matters.

“I think it could potentially … have a regulatory influence,” said Homer, currently a resident executive at venture capital firm Nyca Partners.

Hochul’s office did not respond to a request for comment.

New York will have to compete with other crypto-friendly states and cities. Colorado, for example, passed a law in 2019 that exempts digital currencies from certain securities rules. Wyoming has created a special purpose card for crypto companies.

Miami Mayor Francis Suarez, with whom Adams has already established a friendly rivalry on Twitter, is also courting cryptocurrency companies, promoting lower taxes and costs of living.

Crypto executives say there is room for more than one city to emerge as crypto destinations given the booming growth of the industry. Dexter pointed out that New York has already managed to attract tech talent from Silicon Valley, which could also help give Adams an edge.

“There is this opportunity to have some cryptocurrencies,” Dexter said. “I think it will have some success.”

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Reportage by Hannah Lang in Washington; editing by Michelle Price and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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