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New York official to introduce virtual currency regulation

Department of Financial Services wants enhanced disclosure rules and more

A New York regulator has introduced new details on his agency’s plans to govern virtual currency firms in the Empire State in order to protect citizens again money laundering. Brian Lawsky, superintendent of New York's Department of Financial Services, expects to adopt “enhanced” consumer disclosure rules, capital requirements and a framework for permissible investments with consumer money.

The discussion on virtual currency regulations comes after the value of bitcoin plummeted on a big, Japan-based exchange on Friday. Bitcoin lost 20 percent of its value, dropping to $960 per unit and prompting the exchange to halt customer withdrawals. The volatile functions in the value of the currency had a knock-on effect in Slovenia on Tuesday, where a Bitstamp also froze customer withdrawals, blaming DDoS hack attacks.

“We do not have to throw out all of our existing rules for money transmitters or banks, which have generally served consumers well when vigorously enforced,” Benjamin Lawsky, superintendent of New York Department of Financial Services, said yesterday in a speech to a New America Foundation conference on Bitcoin in Washington. “Certain aspects of virtual currency could dovetail with existing regulations.”

According to Lawsky’s speech, New York is considering a system that “piggybacks” on existing federal regulations on money laundering without making its own separate set of rules. In a speech in Washington on Tuesday, Lawsky said consumers need to know that virtual currency transactions are generally irreversible, and that they could lose their principal if they hold onto Bitcoins for an extended period.

According Bloomberg, Bitcoin entrepreneurs urged Lawsky last month to avoid writing new rules that could stifle the up and coming technology’s promise to get lower costs and less fraud in the existing payments system dominated such as Visa and JPMorgan Chase &Co.

Lawsky has said he plans to issue a "BitLicense" for businesses that use the new currencies, and he intends to provide regulations this year, which could make New York the first U.S. state to regulate virtual currencies such as Bitcoins.

Also in his speech in Washington on Tuesday, Lawsky said consumers need to know that virtual currency transactions are generally irreversible, and that they could lose their principal if they hold onto Bitcoins for an extended period. 

 

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Alexis Harrison

Alexis Harrison is a Connecticut-based writer and public relations professional whose career spans both print journalism and broadcast news. Alexis started her professional life as...

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