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The legality of buying and trading cryptocurrency in New York State is quite complex due to the specific regulatory framework that has been put in place. Here’s an explanation to help clarify the situation:
New York State introduced the BitLicense in 2015, which is a regulatory framework for businesses involved in virtual currencies. It is issued by the New York State Department of Financial Services (NYDFS) (Capital Fund Law Group, 2023).
The BitLicense requires businesses to comply with stringent regulatory standards, including capital requirements, cybersecurity measures, anti-money laundering (AML) protocols, and reporting requirements (Capital Fund Law Group, 2023).
Legal to Buy and Trade: It is legal for individuals to buy, hold, and trade cryptocurrencies in New York State. However, the platforms that facilitate these transactions must be licensed under the BitLicense framework if they operate in New York (New York State Department of Financial Services).
Not all cryptocurrency exchanges have obtained a BitLicense, which means they cannot legally offer services to residents of New York. However, several major exchanges do hold a BitLicense and can operate legally within the state.
Some exchanges with BitLicense.
Coinbase: A widely used platform in the USA, Coinbase is fully compliant with New York regulations (Suarez, 2017).
Gemini: Founded by the Winklevoss twins, Gemini is based in New York and fully compliant with the BitLicense requirements (Cryptopedia; Cryptopedia Staff, 2021).
Bitstamp: One of the longest-running cryptocurrency exchanges, Bitstamp has a BitLicense to operate in New York (Bitstamp, 2019).
itBit (now Paxos): A trusted platform that also offers stablecoins and other digital assets (Paxos, 2019).
eToro: Known for its social trading features, eToro has secured a BitLicense to operate in New York (ETORO, 2023).
NOTE: Always verify their compliance with regulations regarding the state (generally the place, country or/and region) where you live at.
Select an exchange that holds a BitLicense and is compliant with NYDFS regulations.
Examples: Coinbase, Gemini, Bitstamp, Paxos.
Sign up for an account on the chosen exchange.
Complete the KYC (Know Your Customer) process, which typically involves providing identification documents and proof of address.
Deposit USD into your account using methods such as bank transfer, credit/debit card, or other supported payment methods.
Use the deposited funds to buy cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Solana (SOL), etc.
You can also trade between different cryptocurrencies on the platforms.
You can withdraw your funds back to your bank account or transfer your cryptocurrencies to a personal wallet.
(CryptoVantage, 2023)
(Finder)
Ensure that the exchange you are using is compliant with New York regulations to avoid any legal issues.
Use strong security practices, such as enabling two-factor authentication (2FA) and using hardware wallets for long-term storage of cryptocurrencies.
Regulations can change, so it’s important to stay updated on any new rules or changes to existing regulations.
Be aware that licensed exchanges will report certain information to regulatory authorities as required by law, which may include your transaction details and personal information.
