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 last week, 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.”
Rather than fear blockchain technology and cryptocurrencies, Vanel said New York should study and understand it. He has proposed a series of bills on the issue, the most important of which is to create a task force comprised of technologists, community members and business leaders.
The task force would study not only the effect of cryptocurrency on the state, but how regulations like the BitLicense affect businesses.
“Since we’ve entered our BitLicense, there’s been a number of companies that have left our state,” Vanel said. “There’s been a number of transactions that we don’t have here.
“Let’s not say whether it’s good or bad, let’s get the stakeholders together,” he added. “That’s the approach we should take as we see what’s going on and as the industry matures.”
Another bill he has proposed would employ blockchain technology for state records. It can be used to store data, but also for tasks like pulling transcript records at a SUNY school.
Vanel acknowledged the trepidation among many of his state colleagues. People are not comfortable with new technology on uncharted ground, he said.
“Things are still happening and solidifying,” Vanel said. “What’s important is to see where the ball is going and see where New York State is going.”