Businesses specializing in digital currency transactions may soon require a “BitLicense” to operate in New York State.
The New York Department of Financial Services is holding a series of hearings this week on the future of online currencies. Coincidentally, the hearings come at a time of shock in the Bitcoin community following the arrests of two of its high-profile members. The hearings were apparently scheduled well in advance, with the department announcing a “Notice of Inquiry on Virtual Currencies” last August.
Benjamin Lawsky, spearheading the hearings, said “Ultimately, it’s our expectation that the information we’ve gathered in this fact-finding effort will allow us to put forward, during the course of 2014, a proposed regulatory framework for virtual currency firms operating in New York”.
The hearings are attended by Lawsky, his colleagues and a panel of high profile bitcoin players. In attendance were the Winklevoss twins, who previously had invested in now-defunct Bitinstant. They announced plans to create a Bitcoin ETF but expressed concern over the prospect of overregulation crippling the development. They have also called for a “sheriff” to police the “wild, wild West” of virtual currency.
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Also in attendance are Charles Lee, founder of Litecoin, and several leading bitcoin venture capital figures.
Mr. Lawsky also made reference to the recent arrests and tapped the panel for ideas on preventing the next Silk Road fiasco. Jeremy Liew of Lightspeed Venture Partners responded that the arrests themselves were proof that the system can be policed (and this can serve as adequate deterrent). Not every crime can be proactively prevented, just as we continue to observe in the conventional forex world.
The institution of a “BitLicense” in New York may eventually spur other states to follow suit and some form of federal involvement may just be a matter of time.