NYS Makes Bitcoin History
For better or worse, New York State’s Department of Financial Services (DFS) made history yesterday. It was the first regulator on either the state or federal level to propose regulating virtual currency operators. Its regulations proposing licensing requirements were finalized this past June and yesterday the Department announced that Circle Internet Financial is the first corporation to receive a BitLicense.
Under New York’s new regulations companies engaging in “virtual currency business activity” involving New York or New York State residents must be licensed. These regulations generally define virtual currency business activity as encompassing the receiving, storing, buying, or exchanging of virtual currency. Circle Internet is one of the growing number of companies specializing in platforms that allow consumers to send and receive payments between each other electronically. Presumably, the BitLicense will make it easier to offer its members the option of paying for goods in either Bitcoins or traditional currency. New York State banks and credit unions are exempt from licensing requirements. (3 NYCRR 200.3)
In honor of the late, great Yogi Berra, who passed away yesterday, you might say that when it comes to virtual currency, New York came to a fork in the road and took it. Former Superintendent Benjamin Lawsky made the regulation of virtual currency a top priority of the Department. Is it better to let the industry grow organically to maximize the attractiveness of New York as a center of Bitcoin innovation? Or will an appropriate regulatory framework help spur innovation by helping to distinguish the vast majority of legitimate virtual currency entrepreneurs from the bad actors who are attracted to its potential application to money laundering?
In March 2013, FinCEN issued guidance outlining the applicability of the Bank Secrecy Act to persons administering virtual currency exchanges, but as I noted New York is the first entity to issue Bitcoin licenses.
Incidentally, I have been looking over Yogi Berra’s statistics this morning and he is one of greatest of the truly great Yankees. It wasn’t too long ago when getting a plaque in Monument Park at Yankee Stadium was more difficult that making it into the Hall of Fame. In contrast, it seems like just about every other day this year another Yankee’s number has been retired. That’s too bad because Yogi is one of the handful of people who truly deserve the honor.