New York Attorney General, Eric Schneiderman, launched an investigation into 13 cryptocurrency exchanges on Tuesday.
AG Schneiderman sent a letter with a questionnaire to Coinbase, Gemini, Bit Trust, and ten other exchanges requesting more information on the exchanges’ trading policies, basic operation, fees charged, and controls against money laundering and hacks. The AG justified his inquiry by arguing that “consumers in New York and across the country have a right to transparency and accountability when they invest their money,” but they often “don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms”.
Most exchanges welcomed the inquiry, but Kraken’s CEO, Jesse Powell, took a stand by saying “I realized that we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet.” Powell was referring to the infamous BitLicense New York City issued a few years back that cause many cryptocurrency companies, including Kraken, to emigrate from the NYC area. The mass emigration was not completely lost on lawmakers since they are now debating about revising the BitLicense or possibly getting rid of it entirely.
Innovation finds the path of least resistance
New York City is viewed as the financial capital of the US and possibly even the world. However, Wall Street has been slow to adopt new technology since many of their financial systems run on old software and techniques. Cryptocurrencies are quickly changing that dynamic by distributing power back to individuals through blockchains that enable the creation of a trustless distributed network, which eliminates the need for large banks as trusted financial intermediaries. Cryptocurrency businesses were spouting up between the cracks of Wall Street not too long after the creation of Bitcoin, but that abruptly stopped after the creation of the BitLicense.
The BitLicense was an attempt to regulate crypto related businesses with the ultimate goal to protect consumers, but like many policies that have unintended effects separate from their intention, the BitLicense actually hurt many businesses. These businesses had no choice other than to leave the city, which left consumers worse off by limiting their choices.
Nevertheless, those cryptocurrency businesses found a way to continue to exist in other states within the US or other countries. The fact that cryptocurrencies are decentralized in nature makes their ability to relocate relatively easy. However, it should be noted that location-based knowledge spillover effects do exist, as discussed within urban and spatial economic analysis, which increases the overall knowledge and services of businesses. Knowledge spillover effects have been shown to have the greatest influence on businesses that are within close physical proximity of each other, but blockchain is a new development that evolved on the internet so it will be worth studying to see how blockchain development handles repetitive relocation due to government persecution. The constant relocation disrupts these knowledge spillovers, but most blockchain developers are very internet-savvy, as their job requires, so these disruptions may have smaller effects than it has had on past industries. So far, many cryptocurrencies and blockchain businesses have been able to relatively easily expand their services to consumers across the world to help individuals that need financial independence.
Dash has been leading decentralized development
Dash has been able to leverage their treasury fund to help the community develop projects that serve the rest of the Dash community and world at large through projects that are not beholden to one particular investor. In addition, since the Dash treasury is decentralized and the Dash community is spread across the world, Dash is able to fund projects without having to worry about a regulation crack down within any specific cities decimating overall Dash services. Dash has projects in the US, Mexico, South America, Asia, Africa, Europe, and many more, which makes the overall suite of Dash projects very diverse and robust. These developments have occurred though a skillful, yet non-centralized, spontaneous coordination of individuals.
The Dash community has been actively developing and advancing Dash online through many different channels, which challenges the traditional theory that some of the best development will come from location-based knowledge spillover effects. However, it can be said, at least for Dash usage, that Dash has been having significant adoption rate increases in New Hampshire and Venezuela where many users already reside. So if economic research shows that there is still significance of close physical proximity for location-based knowledge spillovers in the internet-age, then Dash has already begun to establish new financial and cryptocurrency capitals – one in North America and one in South America.