New York has proposed the nation’s first comprehensive Bitcoin regulation

The New York Department of Financial Services has released it’s first draft of Bitcoin regulation in the form of BitLicenses, the agency announced today in a press release. The regulation will require businesses that buy, sell, or process the cypto-currency on behalf of customers to acquire licenses. The draft builds in a lot of protections for Bitcoin users, but it also takes away some level of anonymity. Lisensees must keep records of who their customers are, where they live, and whether they check out against the U.S. Treasury’s list of bad actors – taking anonymity out the equation. The potential regulation has serious implications for the way Bitcoin businesses operate.

New York State’s top financial regulator has taken a big step to bring Bitcoin and other virtual currencies under its purview. On Thursday, Benjamin M. Lawsky, the superintendent of financial services, announced proposed regulations for virtual currency companies operating in New York. The “BitLicense” plan, which includes rules on consumer protection, the prevention of money laundering and cybersecurity, is the first proposal by a state to create guidelines specifically for virtual currency. “It’s a comprehensive framework. It’s trying to get at the whole virtual currency ecosystem,” Mr. Lawsky said in an interview. “We’ve tried to build some flexibility into these rules so, as these technologies change, we can bend to allow those innovations to continue.” The new rules would be required for Bitcoin exchanges and for companies that secure, store or maintain custody or control of the virtual currency on behalf of customers. Merchants that accept Bitcoin for payment, like Overstock.com, would not need to apply for a license. Mr. Lawsky’s office, the Department of Financial Services, has not come down particularly hard on Bitcoin. Rather, the rules, the product of a nearly yearlong review, are intended to inspire consumer confidence and promote commerce by encouraging more companies to come to New York. “My hope is that we’re going to create a race to the top,” Mr. Lawsky said.

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