New York's proposed Bitcoin rules include consumer protections
- 18 July, 2014 03:47
Companies trading in Bitcoin and other virtual currencies would be required to hold enough of the currencies to cover their debts to customers and would have to verify the identities of account holders as a protection against money laundering, under new regulations proposed by the New York State Department of Financial Services [DFS].
The proposed rules, announced Thursday, would also require virtual currency traders to develop customer complaint procedures, to adopt cybersecurity policies and to submit to examinations by the DFS in exchange for a so-called BitLicense to trade in virtual currencies.
DFS has conducted an 11-month inquiry into Bitcoin regulation, with the department's interest starting just months after trading problems surfaced at Mt. Gox, a large Japanese Bitcoin-trading service. Law enforcement officials have also raised concerns that the anonymity of Bitcoin owners could open the door to easier money-laundering schemes.
"We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity -- without stifling beneficial innovation," DFS Superintendent Benjamin Lawsky said in a statement. "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."
New York would be the first state to issue virtual currency regulations. DFS plans to publish the proposed regulations next Wednesday. Their publication will start a 45-day public comment period. DFS will also publish the proposed rules on Reddit, the content-sharing site with a large community of virtual currency users.
New York would require BitLicenses for businesses that receive or transmit virtual currency on behalf of consumers, or store or control virtual currency for customers. DFS would also require a license for businesses that convert virtual currencies to other currency, or that buy or sell virtual currency as a business model.
The licenses will not be required for merchants or consumers that receive virtual currencies as payment for goods or services, DFS said.
Under the proposed rules, DFS would require virtual currency licensees to provide detailed receipts to customers, and would require them to monitor transactions for money laundering and report suspected activity to the department.