New York State Wants To Heavily Regulate Bitcoin Trading
2014 07 21
By Frederick Reese | MintPress News
The proposal would establish a mandatory “BitLicense” for any company involved with the buying, selling, mining or trading of cryptocurrencies.
In a move that has upset many in the bitcoin community, New York has become the first state to issue guidelines for the regulation of the trade and storage of bitcoins and other virtual currencies. With New York City being the hub of the nation’s financial network, state regulators introduced the new rules in an attempt to introduce safeguards to cryptocurrencies — which have received scrutiny recently as several states have moved to remove restrictions on virtual currency use or to clarify existing virtual currency laws.
The proposal introduced Thursday by the New York State Department of Financial Services would establish a mandatory “BitLicense” for any company involved with the buying, selling, mining or trading of cryptocurrencies. Licensed firms would be required to learn the names of all cryptocurrency customers they accrue; maintain a reserve of cryptocurrency funds equal to 100 percent of all deposits — similar to cushioning requirements for banks; carry bonds to protect their customers from theft or collapse; and submit to security audits.
“We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity — without stifling beneficial innovation,” said Benjamin Lawsky, New York’s Superintendent of Financial Services. “Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”
These requirements are meant to safeguard cryptocurrency transactions from incidents like the collapse of Mt.Gox. The bitcoin market is still recovering from the fallout of Mt.Gox, which saw 850,000 bitcoins lost due to alleged hacking attacks earlier this year. So far, only 200,000 bitcoins have been recovered.
The licensing requirement is also meant to create a “paper trail” to assist in attempts to combat the use of cryptocurrencies in money laundering and in illicit merchandise trafficking. Merchants and consumers that utilize cryptocurrencies solely for buying and selling goods and services, however, would be exempt from the license requirement.
The Bitcoin Foundation, an organization that works to promote the virtual currency, argues that new and separate rules may not be the best way to promote security within the cryptocurrency. Instead, bitcoin operators should be included in existing securities regulations. This would lend both credibility and fairness in dealing with virtual currencies as investment and trading vehicles.
Read the full article at: mintpressnews.com
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