New York State to welcome regulated Bitcoin exchanges
Bitcoin exchanges could soon be coming to New York State, but will be subject to strict regulation. The New York State Department of Financial Services (NYSDFS) said that it will consider proposals for a regulated virtual currency exchange.
NYSDFS superintendent Benjamin Lawsky said in a statement that recent problems with some Bitcoin exchanges proved "the urgent need for stronger oversight ... including robust standards for consumer protection, cyber security, and anti-money laundering compliance." Companies may submit applications and proposals to operate virtual currency exchanges in New York State. The NYSDFS called the application process "the formal commencement of a regulatory process."
After a series of recent problems and controversy with Bitcoin exchanges, online entities that allow people to trade in the virtual currency, the push for greater regulation is no surprise. Mt. Gox, an exchange in Japan, once the largest trader in Bitcoin, filed for bankruptcy after criminals allegedly electronically stole $400 million in bitcoins. And yet, some hackers claim to have broken into the files of Mt. Gox CEO Mark Karpeles and found evidence that the story of theft is part of a financial fraud.
Just over a week ago, another exchange, Flexcoin, closed after claiming to have lost $600,000 in bitcoins after an electronic hack. The company claimed that it "does not have the resources, assets, or otherwise to come back from this loss."
Charles Schrem, the 24-year-old CEO of Bitcoin exchange BitInstant and a member of the board of the Bitcoin Foundation, which promotes and sets standards for the currency, was charged in January with enabling illegal drug transactions with bitcoins.
With all the problems, though, interest in Bitcoin is still high. The current price for the currency is more than $600. The concept is even moving beyond the tech community and speculative markets. Retailer Lord & Taylor has reportedly agreed to accept bitcoins in payment for e-commerce purchases.
The move by New York State is not a first. Bitcoin exchanges have been subject to regulation in the past. In 2013, the U.S. Treasury Department said that they had to collect information about customers because they were considered money transmitting businesses.The NYSDFS said that it will also likely consider proposals and applications for "other types of virtual currency firms beyond exchanges." That would likely include so-called Bitcoin miners, or companies that solve the complex mathematical problems that let them create new blocks of bitcoins.