A new bill seeking to regulate New Jersey crypto companies working with digital assets and financial services is a big improvement over last year’s version, industry insiders said this week.
New Jersey Assemblywoman Yvonne Lopez’s interest in Bitcoin began with complaints from elderly constituents about Bitcoin ATM scams, and she wrote a bill that would have regulated cryptocurrency companies as heavily as New York’s BitLicense.
But that was 2019.
On Feb. 20 the Middlesex County Democrat introduced the “Digital Asset and Blockchain Technology Act.” It is a much more balanced bill, Guillermo Artiles, co-founder of the Blockchain Association of New Jersey, told Modern Consensus.
It mandates licensure, disclosure of information about each firm and its backers, and sets anti-money laundering (AML) and countering the financing of terror (CFT) requirements.
While the bill’s primary purpose is consumer protection, Lopez made clear that another goal is attracting small digital currency and blockchain businesses to the Garden State. Specifically, she wants to increase what she says is a stream of entrepreneurs crossing the Hudson River to escape New York’s toughest-in-the-nation cryptocurrency regulations.
“[W]e must welcome emerging industries to do business here in New Jersey,” Lopez said in a release. “It’s also important that we establish fair and reasonable requirements for this new sector that will protect businesses and consumers alike.”
An influential friend
One thing the bill has going for it is Rep. Lopez herself. While fairly new to the Assembly, she is far more influential than her first-term tenure would indicate.
She is the running mate of Assembly Speaker Craig Coughlin in the 19th District, according to New Jersey Globe, a political news site. She also shares a chief of staff with him.
That said, Artiles declined to offer a prediction of when the bill would pass. A partner in the New Jersey lobbying firm of McCarter & English and chair of its government affairs practice, he noted that the bill has not been presented to the leaders of either house. Nor has it had a committee hearing, although Artiles said there were “whispers” of having one in April.
State Sen. Nellie Pou plans to introduce the bill in that house soon, he added.
Focus on financial services
Lopez’s 2019 bill was “sort of an initial overreaction…which was her introducing essentially a carbon copy of New York’s BitLicense,” Artiles said. “So, we sat down with her. She was very receptive to the notion that, while we all wish we could continue being unregulated, we recognize that there’s now a push in the legislature to regulate the industry. Our goal from the very beginning was to create an even-handed environment where the government can recognize the entities that are operating in the state…but not creating the insanely high licensing [requirements] we saw in New York.”
Instead, the new bill to regulate New Jersey crypto companies creates “cooperative engagement” with the New Jersey Department of Banking and Insurance (DOBI), said Artiles. “It’s a step in the right direction in terms of how to regulate on the industry.”
Specifically, the bill would require six types of businesses to obtain a license from DOBI: exchanges, custody services, digital asset transmitters, digital asset issuers, and companies facilitating the buying and selling, or borrowing and lending, of digital assets.
Any cryptocurrency business would have to disclose:
- Its legal name and trade name
- Names, addresses, and employment histories of its officers
- Any license revocation, suspension, rejection, or other disciplinary action in another state against the company or its officers
- Past criminal convictions and pending cases against the company and its officers
- Any litigation against the company and its officers
- Proof of liability and cyber-security insurance
- Any audited financial statements
In addition, businesses would have to specify the AML and CFT policies and procedures they have in place.
A growing cryptocurrency industry
Artiles said he became involved with the year-old Blockchain Association of New Jersey through a founder and client, Chris Matta, co-founder of Crescent Crypto Asset Management, a cryptocurrency hedge fund.
A Goldman Sachs alumnus, Matta crossed the river to escape New York’s regulatory regime, Artiles said. He added that “little hotbeds” of cryptocurrency companies are forming in Jersey City and Secaucus, both close to New York City.
And, Artiles alluded to it.“The assemblywoman did not know that, so it was great to be able to walk into the room with six or seven cryptocurrency companies,” said Artiles. “It was nice to show her an indicative bunch of folks who were one time in New York and then came to New Jersey.”
Poaching New York businesses is a time-honored and well-respected political sport in New Jersey, so that’s an argument that would go over well.