New York is looking to take a little of the guesswork out of virtual currencies. Presently, there are no rules or regulations for how businesses or individuals must deal with the currencies, such as Bitcoin. However, Reuters reports today that businesses operating in New York will likely have to obtain something called a “BitLicense” should New York’s proposal go through.
Especially in light of yesterday’s arrest of Bitcoin exchange CEO Charlie Shrem, these regulations would be aimed at preventing similar illegal operations, like money laundering. However, state superintendent of financial services Benjamin Lawsky says the regulations will be aimed at tackling the problems without taking away from a technology in its infancy.
At the heart of the issue with Bitcoin and all virtual currencies is that the value depends on the demand of the users. As it becomes a more viable form of payment at more and more locations—now including overstock.com and with the Sacramento Kings—financial agencies have an interest in providing some regulation.
At a two-day hearing on virtual currencies, Lawsky noted that Shrem’s arrest and involvement in illegal activities involving bitcoins has cast a shadow on the whole industry, but that there are legitimate benefits to using a virtual currency. One of those benefits would be offering a little friendly competition to the traditional form of payment. He said that it could encourage the traditional community to start competing in terms of speed, affordability and reliability of transactions.
With a potential “BitLicense” Lawsky says he wants to provide regulation that will still give virtual currencies flexibility, which they require to function as they do. The Wall Street Journal notes that regulation for these virtual currencies is all but certain, as the companies depend on people actually using the product and people will feel more secure once regulations are in place.
Lawsky says he plans to put out a “proposed regulatory framework” some time in 2014 for businesses that establish themselves in New York.