Optimizing Industry Regulation: Phased Approach for Innovation and Consumer Protection

Introduction

Regulating an industry in full for the first time is a complex task that requires careful planning and execution. The Department of Financial Protection and Innovation (DFPI) should consider implementing regulations in phases to ensure progress is made as the new regime is rolled out.

Building the Plane as You Fly

Given the unprecedented nature of this regulatory endeavor, it is important to be flexible and prepared to tailor the regulations along the way. Just like building a plane while flying it, adjustments and refinements will be necessary to ensure the effectiveness of the regulatory framework.

Learning from New York's Innovations

New York has set a precedent in the industry by introducing innovative measures such as coin listing guidance and a conditional licensing framework. These initiatives have proven successful, as evidenced by PayPal becoming the first company to obtain a conditional license from the Department of Financial Services (DFS). Through a partnership with Paxos Trust Company, PayPal customers can now buy, sell, and hold certain cryptocurrencies.

Conclusion

Regulating an industry for the first time requires a strategic and phased approach. By learning from the experiences of other jurisdictions and being adaptable, DFPI can create a regulatory framework that fosters innovation while ensuring consumer protection. It is crucial to strike a balance between flexibility and stability to effectively regulate the industry and promote its growth.