New York Hates the Bitcoin Lightning Network
When Coinbase announced that they were integrating the Lightning Network for Bitcoin deposits and withdrawals, I knew immediately that I wouldn’t be able to use it.
I don’t use Coinbase personally, but when they launched their Lightning service, I just had to check to confirm my suspicions. And of course, Lightning is not available for their New York customers.
The reason I knew this would be the case, is that Lightning is missing from a slew of Bitcoin apps if you live in New York state.
Want to use Lightning with Cash App? Not in NY
How about the sleek integrated Primal wallet for Nostr? If you reside in NY, you are not allowed.
Other Bitcoin related apps just don’t operate in NY all together. Excellent services like Strike are just not able to be used by New Yorkers at all. Which seems insane for a state known to be the financial capital of the world and the home of Wall Street, a place you would think is on the bleeding edge of financial technology.
But, there is a reason for this: Regulation
Way back in 2014, which truly was “way back” in Bitcoin years, NY state was grappling with this new asset class called “cryptocurrency.” Bitcoin was only 5 years old, a baby in the world of finance.
The NY State Department of Financial Services was tasked with creating a regulatory framework for these new digital assets within the state. They claimed the intention was to be forward looking as first mover in the space, innovative for the time. What they came up with was called the BitLicense. This new BitLicense would have to be granted to companies operating in the digital asset space before they could do business in NY.
It was immediately clear that this new regulation would prevent many businesses from operating in the state, and kneecaps those that do to this day.
It has been almost ten years since the BitLicense program was implemented and what New Yorkers are left with today is a handicapped digital asset experience that doesn’t seem to be getting better any time soon.
But why the Lightning Network?
It seems custodial Lightning is at odds with NY regulation. Essentially, any service that takes custody of your funds via a Lightning transaction. This is kind of wild since custodial services, like Coinbase, that have a BitLicense, still can’t facilitate Lightning transactions for their users.
There is no question that the Lightning Network is beneficial to users. By speeding up settlement and reducing transaction fees, it provides a frictionless option to move Bitcoin.
My suspicion is that NY State doesn’t like how difficult it can be to trace Lightning transactions. Lightning provides a decent amount of privacy, certainly much more than base layer Bitcoin, and that could be the reason Lightning is a no-go within the state.
The time has certainly come to do away with these unnecessary regulations. It makes no sense to block New Yorkers from having access to the Lightning Network, and the entire BitLicense process is preventing innovation in the state.
States like Texas have been supercharged by the Bitcoin industry by embracing it, while New York is being left in the dust.
