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NY Seeks Bitcoin Exchange Regulations

Proposal would require state's digital currency dealers to follow strict anti-money-laundering and consumer protection rules.

New York is moving to bring some order to the largely unregulated world of digital currencies by proposing state licensing requirements for dealers that would include strict anti-money-laundering safeguards and consumer protections.

The state's Department of Financial Services proposed the regulations under existing law. Although the proposed regulations do not mention Bitcoin, the department refers to the proposal as "BitLicense." It is a response to the growing popularity of electronic money and its potential for misuse in burgeoning underground online economies.

The proposal has been released for public comment. If approved, a person or business engaged in "virtual currency business activity" would have to be licensed by the state unless already chartered to engage in currency exchanges. Dealers would undergo background checks and would have to show that business would be conducted "honestly, fairly, equitably, carefully, and efficiently."

 

[Read the rest on InformationWeek]

William Jackson is writer with the <a href="http://www.techwritersbureau.com" target="_blank">Tech Writers Bureau</A>, with more than 35 years' experience reporting for daily, business and technical publications, including two decades covering information ... View Full Bio

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Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
7/25/2014 | 8:35:18 AM
Oversight is needed
I know virtual currency supporters do not want to see any sort of regulation or oversight. However, the wild west mentality when it comes to the v-currencies is one of the reasons why adoption is lower than it should be. Granted, you can never get rid of all bad business practices with regulation (look at the banking industry), but many scams are stopped by industry oversight before investors can be harmed.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
7/28/2014 | 4:20:16 PM
Re: Oversight is needed
It was interesting to note that the proposed NY regulation included some consumer protections. There hasn't been anything from the Consumer Financial Protection Bureau on virtual currencies yet, but if states start coming up with their own consumer protection requirements that might push the CFPB to take a look at it.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
7/28/2014 | 4:27:19 PM
Re: Oversight is needed
It's almost a chicken-egg scenario. The CSFB isn't looking at v-currencies yet because the market is still rather small. And the reason why consumers aren't using v-currencies is because their isn't enough oversight. Maybe if states start to monitor the segment consumers will feel more comfortable, but that will only be in a limited number of states.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
7/28/2014 | 4:30:32 PM
Re: Oversight is needed
Yeah most states aren't going to come out with any Bitcoin regulations. I thought it was interesting though how Ny regulators said they wanted to come up with this framework to help encourage innovation around virtual currencies, and tied that back to keeping NY as a center of world finance. Somebody must think virtual currencies will play a bigger role in financial services.
Becca L
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Becca L,
User Rank: Author
7/31/2014 | 3:09:18 PM
Re: Oversight is needed
The market is still very small, so it can grow in a number of ways, regulators are definitely getting in at a good time. However, as they develop their framework they must be careful not to stifle innovation. They must be wary of overstepping, and stop progress in v-curencies just because it's scary and confusing.
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