NY Regulator Approves Bitcoin Exchange Coinbase for Ethereum and Litecoin Trading

Digital currency exchange Coinbase has received approval from New York’s financial regulator to offer trading of Ethereum and Litecoin to users in the state. The crypto exchange was also given the green light to offer ‘Shift Card’, its debit card service, in the state.

Coinbase becomes the second cryptocurrency exchange to see its application to offer Ethereum trading approved by the New York State Department of Financial Services (DFS). Notably, Coinbase is also the first approved exchange to offer Litecoin trading for New York users, starting today.

The state’s financial regulator previously granted approval for Ethereum trading to Gemini, an exchange founded by the Winklevoss brothers, in May 2016.

Coinbase will also be permitted to offer its bitcoin debit card service, first launched across 24 states in November 2015. Launched to much publicity, Coinbase’s ‘Shift Card’ became the first bitcoin debit card in the United States.

In its announcement, today, the DFS claims it has “rapidly responded to innovations” by issuing licenses and charters to financial technologies.

In statements, DFS Superintendent Maria Vullo said:

New York continues to lead the nation in fostering financial technology by responsibly promoting innovation and protecting consumers. DFS has proven that the state regulatory system is the best way to supervise and cultivate a thriving fintech industry, like virtual currency.

In no uncertain terms, Vullo then adds that the DFS will oppose the federal effort of the US Treasury Department’s initiative to consider granting charters to allow Fintech companies operate as special purpose national banks.

“New York will remain steadfast in pushing back against federal encroachment efforts like the OCC’s proposal to impose a one-size-fits-all national bank charter that increases risk and seeks to usurp state sovereignty,” Vullo stated.

The department’s BitLicense, which has frequently seen criticism for restrictive regulations for the cryptocurrency industry, has so far granted a total of three licenses since it came into effect in 2014.

Circle became the first company in the industry to gain a BitLicense in September 2015. Ripple followed in mid-2016, granting Ripple Labs the approval to sell and obtain its native digital asset, XRP. Coinbase became the third company to gain the license in January this year, seeing approval to offer bitcoin trading, storage, and transmission for New York customers. Gemini is operational in New York after receiving a DFS charter to offer services in the state. Regulated as a fiduciary, it is exempt from requiring a BitLicense and can service both individual and institutional clients.

“At Coinbase, our first priority is to ensure that we operate the most secure and compliant digital currency exchange in the world,” stated Coinbase chief executive Brian Armstrong upon receiving approval today.

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Digital Currencies Need Regulation to Grow

Researchers from the Bank of Canada maintain that digital currencies such as bitcoin need government intervention for it to flourish long-term.

The report, Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies [PDF], examines the period in Canada when private bank notes and government issued notes or ‘Dominion’ notes were in circulation at the same time in the 1800s.

The report states that because the notes shared the same characteristics of today’s digital currencies, it can draw from the experience as to how today’s digital currencies might function. It adds that private digital currencies are likely to be counterfeited too. However, while a central bank can issue its own digital currency, it finds that doing so is unlikely to push out private alternatives.

The report’s authors state:

We conclude that well designed and managed private digital currencies could circulate widely but only with appropriate government regulation to ensure their safety, soundness, and uniformity.

CAD-Coin

First revealed in June 2016, although it was first proposed in 2014, the Bank of Canada confirmed that it was working on its own digital currency prototype known as the CAD-Coin. In partnership with some of Canada’s biggest banks and R3, it was announced that this would be the digital equivalent of the Canadian dollar.

Since the prototype, details of the experiment are yet to be revealed; however, according to Carolyn Wilkins, Bank of Canada senior deputy governor, central-bank issued currencies play a significant role in financial stability and function as a ‘transmission mechanism for monetary policy.’

In her opinion the digital currency bitcoin is viewed more of a commodity rather than a money itself despite the fact that this was the currency that provided the building blocks for the Bank of Canada to develop its CAD-Coin.

Government Regulation

The whole point of bitcoin’s existence and the fact that it remains the most popular digital currency is down to the fact that it’s an unregulated and decentralized currency.

The fact that the Bank of Canada believe that the currency needs government regulation for it to flourish in the long-term is unlikely to go down well with the general populace, and is unlikely to happen anytime soon.

Not only that, but given that a bank-issued digital currency such as the CAD-Coin is unlikely to force bitcoin out illustrates the impact the currency has produced in its relatively short life-span.

As an alternative digital currency that people are using there are many who would say that it’s more money than commodity.

Featured image from Shutterstock.