‘BitLicense’ Regulatory Framework Proposed by New York’s Lawsky

Jul 17, 2014 10:41 am ET

July 17 (Bloomberg) -- New York’s financial regulation chief is proposing a “BitLicense” regulatory regime that he says will protect consumers and root out wrongdoing without stifling innovation by virtual-currency businesses in the state.

Companies that store or exchange virtual currencies for cash would have to obtain a license from the state under rules proposed today by Benjamin Lawsky, New York’s superintendent of financial services. The measure, which will also cover issuers of currencies, will be open for public comment for 45 days beginning July 23, Lawsky said in a statement.

“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,” Lawsky said in the statement.

The regulations would require companies to hold the same amount of virtual currency that they owe customers, and not lend or otherwise use it. They would also have to disclose applicable costs and issue receipts to customers. The firms also would have to follow anti-money laundering rules such as verifying customers’ identities and addresses.