New York state’s top financial regulator plans to propose rules this year regulating Bitcoin businesses operating in the state.
This would make New York the first state to do so, and given the state’s prominence as a financial hub, it’s a big step for the virtual currency.
Benjamin Lawsky, superintendent of the New York Department of Financial Services (NYDFS), said in a press conference Tuesday that recent events convinced him that regulating the currency will bring the actions of its users and flow of transactions into the light of day.
“The legal action that we saw yesterday underscores how critically important it is that we put in place guard rails for this industry to help root out money laundering and other misconduct,” he said.
Lawsky was referring to Monday’s arrest of the founder of a prominent Bitcoin exchange company. Charlie Shrem, chief executive of BitInstant, was charged with running an illegal scheme to sell the digital currency to customers trafficking narcotics on the now-defunct drug website called Silk Road.
Shrem was arrested Sunday at John F. Kennedy International Airport in New York and faces charges of conspiring to commit money laundering and operating an unlicensed money-transmitting business, prosecutors said.
Robert Faiella, an underground Bitcoin exchanger, faces the same charges for allegedly obtaining Bitcoins with help from Shrem’s company and then selling the digital currency to users of Silk Road, which only accepts Bitcoin as payment.
Lawsky is holding two days of hearings this week on the issue of regulating Bitcoins and is assembling a diverse group of people to weigh in on how the rules should work.
Such persons will include law enforcement, regulators, investors, technologists, merchants, and “a number of other individuals on the ground floor of this fledging industry,” he said.
“We hope to make a positive contribution to the public dialogue on this issue as NYDFS and other regulators try to grapple with the appropriate regulatory guidelines for this industry.”
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Julie DiMauro is the executive editor of FCPA Blog and can be reached here.
1 Comment
Thanks for the post. I am a bit shocked that it has taken this long for the state to regulate Bitcoin given its association with money laundering and other criminal activities. I have been reading a lot about Bitcoin, but what I still don't understand is this: How was it created? And how are more Bitcoin's generated?
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