On July 17, 2014 New York became the first state to propose regulations to the online currency bitcoin. Benjamin Lawsky, the Superintendent of the NYS Department of Financial Services ("DFS"), unveiled a summary of what the DFS will publish on July 23, 2014 thus bringing Bitcoin one step closer to a legitimate form of money. Since New York is the leader in financial regulation, other states will surely pay attention.
Businesses that buy, sell and store bitcoins would be required to have a license and follow all of the new regulations. It's an attempt to clamp down on black market uses for Bitcoin, such as money laundering and buying illegal goods, as was done on Silk Road. Customers who use bitcoins to buy legal goods needn't worry: A license for simply using bitcoins isn't necessary.
Financial regulators will carefully screen anyone running a virtual currency business. The plan, known as "BitLicense," includes, as part of the proposed new rules, requirements that all bitcoin trading businesses pass background checks, know all their customers, be open to regulator inspection at any time and keep 100% of account reserves on hand including keeping detailed records on all their customers. Regulators will check for criminal background, professional qualifications, and judge whether they're fit to manage money. Maybe most notably will be the obligation and requirement of virtual currency businesses to have a compliance officer on staff. If anything goes sour, regulators can pull the license.
New York regulators have been working on the proposed regulations for a year. Before the regulations are finalized, there will be a 45 day public comment period, starting July 23, 2014. After that, the DFS will make any necessary changes in the proposed regulations.
The era of bitcoin regulation is finally upon us. Joseph R. Sahid, Esq., a member of the Mushkinlaw bitcoin team commented that "No one in the virtual currency world can ignore what will be published on July 23, 2014."
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