NY Regulator Issues Final Bitcoin Rules
New York state's chief financial regulator has issued final rules for companies dealing in bitcoin, adding more oversight to the virtual currency that has widened in popularity and moved into the commercial mainstream.
Benjamin Lawsky outlined the third and final version of the rules in remarks Wednesday at a financial industry conference in Washington, according to The Associated Press.
Lawsky's agency has worked for two years on rules requiring businesses to obtain a special license if they use bitcoin or other digital currencies and to comply with know-your-customer guidelines to prevent money laundering.
He said BitLicence, the framework for regulating virtual currency firms, "applies only to financial operations and not to software developers, individual users or retailers who accept Bitcoin payments."
"The emergence of digital currency and other new forms of payments technology represent an important test for financial regulators such as NYDFS," Lawsky, superintendent of the New York state Department of Financial Services, said in his speech at the BITS Emerging Payments Forum in Washington.
Lawsky spoke about getting the balance right as a regulator and spoke to the idea that some have offered of banning digital currency.
"That is a curious concept — banning Bitcoin," Lawsky said. "How exactly does someone go about banning computer code?"
"This is a critical and exciting time in the broader evolution of the payments system," said Lawsky. "Virtual currency is a novel field for regulators and everyone — including our office — must be willing to take a hard look at how these new rules are working when they are put into practice."
Bitcoin, the virtual currency that can be used to buy and sell some goods and services without government-issued money, is a phenomenon that has moved in recent years beyond its origins as an oddity embraced by a cadre of libertarians and computer geeks.
The new regulation is issued at a time when there is concern that digital currency will be used use for illegal activities. Bitcoin has been linked to the hidden Silk Road drug marketplace, as well as cyber attacks which took place on cryptocurrency exchanges, resulting in the loss of customer funds. Mt. Gox closed down last year, losing approximately $500 million of its customer's money.
Wednesday's speech was Lawsky's final one as New York's superintendent of financial services. After four years in the post regulating Wall Street banks and the financial industry, he leaves this month to start a consulting firm.
The Associated Press contributed to this report.