New York considers new restrictions on Bitcoin
The subpoenas issued from the New York State Department of Financial Services (DFS), led by chief regulator Benjamin Lawsky.
In an explanatory memo issued today by the DFS (PDF), Lawsky writes that, although Bitcoin is a financial sector with a lot of potential “we have also seen instances where the cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running, and child pornography” and therefore, “it is in the common interest of both the public and the virtual currency industry to bring virtual currencies out of the darkness and into the light of day through enhanced transparency.”
The DFS, Lawsky writes, is currently conducting an inquiry into appropriate regulatory guidelines for the digital crypto-currency.
Among the possible requirements for Bitcoin companies that New York State is considering:
- Post collateral to secure customer account funds
- Undergo periodic safety and soundness examinations
- Compliance with all current, applicable anti-money laundering laws
However, it is also considering additional, unspecified guidelines specific to virtual currencies.
Among the companies sent the subpoena are Coinbase, BitInstant, Coinsetter and other companies, some of which are funded by high-profile venture capitalists such as Marc Andreesen and the Winklevoss twins.
For the sake of customer confidence, keeping drug and terror organizations at bay, and maintaining Bitcoin as a viable long-term investment, DFS argues that “putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual currency industry.”
New York’s scrutiny comes on the tails of a great deal of federal and international regulatory attention, including attempts by California to regulate Bitcoin and a finding by a federal judge in Texas that Bitcoin is indeed currency, and therefore falls within the purview of the American financial regulatory regime.
Photo by Jonathan Waller/Flickr