The New York State Department of Financial Services (DFS) issued a proposed “BitLicense” regulatory framework for virtual currency businesses Thursday, and is asking for public comments on the plan.
The framework includes consumer protection, anti-money laundering and cybersecurity rules specific to virtual currency firms.
The guidelines are the product of a nearly year-long DFS inquiry, including public hearings in January this year. The proposed rules will be published in the New York State Register’s July 23, 2014 edition, kicking off a 45-day public comment period.
“We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity — without stifling beneficial innovation,” DFS Superintendent Benjamin M. Lawsky said.
DFS BitLicenses would be required by firms buying and selling virtual currency (as a customer business), storage, receipt, transmission, control and issuance.
The license would not be required for merchants or consumers who use virtual currency only for the purchase and sale of goods or services.
A few of the key requirements include:
- Consumer Disclosures. Companies must provide clear and concise disclosures to consumers about potential risk associated with virtual currencies.
- Anti-money Laundering Compliance. Firms need to keep good records of the identity and physical addresses of the parties involved; the amount or value of the transaction and the date, and a description of the transaction. They must verify accountholders’ identities when opening accounts for customers and report suspected fraud and illicit activity to DFS immediately.
- Chief Information Security Officer. Each Licensee must designate a qualified employee to serve as the chief information security officer responsible for overseeing the licensee’s cyber security program and policy.
New York is the first state to offer specially tailored rules for virtual currency firms.
The proposed DFS BitLicense regulatory framework can be viewed here.
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.