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Bitcoin Regulations: New York First to Propose Rules for Virtual Currency Companies

"We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation," said New York Financial Services Superintendent Benjamin Lawsky.

The New York State Department of Finance Services Thursday announced it is proposing new guidelines for companies that buy, sell, store or trade Bitcoins, the virtual currency that is gaining in popularity.

With the new rules, which still must be approved, New York will be the first state in the country to regulate the companies that deal in the currency, according to technology website Re/Code.

The new rules are designed to protect consumers and prevent money laundering, among other safeguards, says Benjamin Lawsky, New York's Superintendent of Financial Services. 

"We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation," said Lawsky in a statement. The department worked on the proposal for more than a year. "Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets."

Companies that deal in Bitcoins would need a "BitLicense" under the proposal, but businesses that simply accept Bitcoins as another source of payment for goods or services would not need a license.

Bitcoins were created five years ago as a peer-to-peer, decentralized virtual currency that allows people and businesses to pay for things with no transaction fees, according to CNN Money. The video above from Bitcoin.org, also explains what the currency is all about (click here to view the clip on YouTube).

Despite its growing acceptance, the virtual currency is not without critics, such as famed economist Nouriel Roubini, who took to his Twitter account, according to CNBC, to call Bitcoins a "Ponzi game and a conduit for criminal/illegal activities."

Lawsky said he hopes the public comment period for the proposed regulatory framework will make the rules stronger. 

"We recognize that – as the first state to put forward specially tailored rules for virtual currency firms – continued public feedback will be an important part of finalizing this regulatory framework," said Lawsky. "We look forward to carefully and thoughtfully reviewing public comments on our proposal." 

Click here to read the proposed regulations.  
Bll July 18, 2014 at 07:20 PM
This sounds ike something out of StarTrek. Glad NY is getting ahead of bitcoins moving into the area. I think Ill stick to uUS greenbacks for now.
James Andrews July 18, 2014 at 10:23 PM
there's a lot more at stake here than just Bitcoin. Whole business models are being created which are open source, automated, fair, and regulated by computer code rather than by people. We are entering a time when we don't have to trust the word of a business partner and we don't have to trust the other party to keep up their end of a bargain. These deals of the future are set in computer code such that no one can cheat. If we make a movie, encrypt it, develop a viewer application to watch it, charge people in Bitcoin to watch it, and we can have the payments go to an account that automatically gives the producer his or her agreed upon cut of revenues. The extras, sound crew, writers, and cast all will be paid from the revenue by the agreed upon percentages and no one can change the deal after the fact. This is a whole new way of creating, financing, and operating a business venture. These new ways offer more benefit to consumers than anyone can even imagine right now. We need to be careful not to stifle these innovations before they can get started.

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