New York State’s Department of Financial Services is looking into creating regulations for Bitcoin and other virtual currency companies, Superintendent of Financial Services Benjamin Lawsky said in a statement Monday.
Lawsky said DFS has launched an inquiry into the appropriate regulatory guidelines for virtual currencies and has already made requests to the companies for more information on how they operate.
“We believe that – for a number of reasons – putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual currency industry,” Lawsky said.
The discussion centers around the legality in which these virtual currencies are used. Lawsky described them as “a virtual Wild West,” as drug traffickers, money launderers, gun runners and child pornography producers use them to conduct business and other illegal activities.
“Indeed, 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,” Lawsky said. “It is vital to put in place appropriate safeguards for consumers and law-abiding citizens.”
He continued, “Based on that initial work, we are concerned that – at a minimum – virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS.”
Areas the state could regulate:
- Safety and soundness requirements help build greater confidence among customers that the funds they entrust to virtual currency companies will not get stuck in a digital black hole.
- Taking steps to root out illegal activity is both a legal and business imperative for virtual currency firms. Serving as a money-changer of choice for terrorists, drug smugglers, illegal weapons dealers, money launderers, and human traffickers could expose the virtual currency industry to extraordinarily serious of criminal penalties.
- Finally, both virtual currency companies – and the currencies themselves – have received significant interest from investors and venture capital firms. Similar to any other industry, greater transparency and accountability is critical to promoting sustained, long- term investment, Lawsky said.