Why New York is the Worst U.S. State for Crypto Users

Why New York is the Worst U.S. State for Crypto Users

Blockchain | 8 minutes to read | 06.05.2022
TL;DR New York is the worst U.S. when it comes to cryptocurrency, and here is why... New York is the only state to require a license for an exchange to operate. Most exchanges don't want to deal with this. Therefore, only two exchanges are easily available. The lack of exchanges also means you have a limited option on easily staking crypto. Exchanges, like Coinbase, that are available in New York are limited on what crypto is able to be staked. New York is the first and only state to have tried to ban proof of work cryptocurrency mining. New York has the 6th highest capital gains tax in the country. This doesn't include the additional tax for New York City residents.
New York is a beautiful U.S. state with an incredible culture. We've got cities with history like Buffalo and Rochester. And we've got the Big Apple itself, New York City, the most populated city in the entire United States. We're known for food like chicken wings, delicious pizzas, chewy bagels, and creamy cheesecake. New York has an amazing landscape. There's the Adirondack mountains, the Finger Lakes, the Thousand Islands, and Niagara Falls. There’s Central Park, Wall Street, Times Square, and the Statue of Liberty! New York is pretty cool! But there's some things New York fails at. Crypto is one of those things. New York City’s Mayor Eric Adams’ wants to make the city “the center of the cryptocurrency industry,” but that’s just not going to happen with how New York State is currently set up. Here are the reasons why New York is the worst state for crypto users.

Limited Exchanges Available

New York does not allow many exchanges to be used by its residents. In fact, only two of them are easily available. Coinbase and Gemini. There are many advantages and disadvantages to each exchange, so why has New York decided not to let many exchanges do business in the state? The answer is because they need to apply and be accepted for a BitLicense, which is just a fancy word for a business license for virtual currency activities. This is something only New York State requires. What are the odds?! Apparently, a BitLicense is needed to protect crypto users from things like money laundering. HAHAHA! Yeah, because the average Joe is a hardcore money launderer. Binance isn’t allowed in the United States at all due to certain regulations. (Freedom! 🤘) So, instead they created Binance.US that follows all the rules so that U.S. residents could finally use the exchange. It’s more like Binance lite. However, this is only available in 44 states, excluding New York. Kraken used to operate in New York until 2015 when the state introduced, what they called the "abominable BitLicense”. Kraken has compared the NY Attorney General to a 'controlling ex'. Hilarious! In fact, Kraken is only not allowed in New York and Washington states, Cuba, Iran, and North Korea, which is a group of countries you definitely want to be on a list with. Sarcasm. Crypto.com isn’t able to do business in New York because they also don’t want to deal with the state’s bureaucracy. New York is the ONLY state where Crypto.com can’t operate. Another platform that IS available in New York State is Robinhood. Robinhood sucks and everyone knows it, but it is an additional choice, and it is particularly good for beginners, or users who are already using the app to trade on the stock market. There are some additional downsides, thanks to New York, like the fact that you can’t use the wallet, so your crypto is stuck on Robinhood and can’t be sent anywhere else. When Robinhood wallets were first introduced they slowly rolled them out over time. I had to sit on a list before I could use the wallet to send my Doge elsewhere, only to find out after months of waiting that it’s not available in New York. I could go on and on with many crypto exchanges. It sounds like crypto companies just don’t want to jump through hoops to deal with this burdensome license when there are 49 other perfectly good states (and other countries) to do business in. All it does is make New York less competitive and less innovative. While Coinbase and Gemini aren’t bad exchanges, it would still be nice for New Yorkers to have a few additional options to invest into crypto.

Limited Staking Options

Since you don't have access to many exchanges you are also limited your availability to easily stake many cryptocurrencies. Not everyone knows how to or wants to stake through a wallet. Exchanges like Binance, Kraken, and Crypto.com allow for easy staking on a multitude of different crypto, all unavailable to New Yorkers. That means no staking most of the top coins. On top of that, these exchanges usually offer really good rates on certain coins that aren’t available elsewhere like Polkadot’s 16% or Polygon’s 10%. Even Coinbase, which is an exchange available in New York, is limited on what they can offer you. Normally, on Coinbase, you can stake Ethereum for 3.675%, except if you live in New York. You also cannot stake Cardano, Cosmos, or Tezos, which are all available to users in other states. However, you can still stake Algorand, Dai and USDC. Not being able to easily stake your crypto is holding New Yorkers back from earning on what they are already holding. We have no idea what crypto will look like in the future, but if it goes mainstream, not being able to stake coins now could be costing New Yorkers a lot of money. However, there are other ways to stake and just because you can’t stake on any exchanges or on Coinbase, doesn’t mean you can’t stake at all. Check out our article on staking Cardano, which works for New York users too. I won’t even mention the tax dollars they are currently losing out on when people go to sell that crypto.

Ban Proof of Work Mining

New York is the first state in the country to try to ban cryptocurrency mining. Mining is when thousands of computers spend energy in order to solve a code that will validate transactions, achieve consensus, and generate new crypto. New York has attempted to ban crypto mining for two years. Bitcoin has been known to be bad for the environment because of the amount of energy it uses during the mining process. Almost half of all Bitcoin miners are in the United States and many of those are located in New York. The positive in this ban is that you are only banned from mining if you are getting your energy through fossil fuels. That means you can still mine Bitcoin if you use renewable energy like solar or wind. However, this does eliminate the use of stranded energy, which is excess natural gas that is burned off during transportation. This energy has been used by Bitcoin miners in order to make use of something that would otherwise go to waste. Not to mention the tax dollars they will lose out on once the miners sell their crypto.

Extremely High Taxes

The last is the worst. Have we mentioned taxes yet? The taxes are crazy! Like stupid crazy! New York has high taxes for everything like gas ($0.48 per gallon, 8th in the country), property (1.72%, 9th in the country), sales (8.52% combined, 10th in the country), income (8.82%, 6th in the country). If you want to make or spend money be prepared to give a chunk of it away to the state. And since this is about crypto, a space where you can make money, you will be taxed for that. Yup, crypto is liable to a capital gains tax just like any other asset. Even paying with crypto counts as a taxable event, and really hurts the purpose of cryptocurrency. New York isn’t the only state to have capital gains tax, but it has the 6th highest capital gains tax in the country at 8.82%, equal to its income tax. That means for every $100 you make, you get to keep $91.18. It’s worse for those who live in New York City, since you have to pay city tax on top of that. There are 44 other states where you would make more money, including some states, like Texas, where there is no capital gains tax. Although, it could be worse. Looking at you California with your 13%. Sadly, this isn't even taking into account the federal taxes. If you include federal taxes, about 33.82% of your crypto profits are subject to tax if you are living in New York. That means you really only get to keep $66.18 for every $100 you make. Again, not counting that extra city tax. So, yeah, taxes are a bit nuts here in New York. Not only do they make it difficult to buy and sell crypto, but if you happen to actually make a profit with it, they will straight up yoink it right from you. But hey, at least we are helping to pay the people who are ruining crypto for us. 🧂 And New York wants to become the center of the cryptocurrency industry. Sounds about right. Summary New York is the worst state for crypto users for the following reasons. New York requires a license, called a BitLicense, in order for an exchange to do business in the state. This means there are only two crypto exchanges available to New York residents, Coinbase and Gemini. Not having access to certain exchanges New Yorkers aren't able to stake as many cryptocurrencies. Even exchanges, like Coinbase, that are available in New York have a limited selection of crypto to stake. New York has attempted to ban proof of work mining using certain energy methods. New York is well known for having high taxes including the 6th highest capital gains tax in the United States. That's less money into your pocket compared to someone else investing in another state.
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