Crypto-currencies can add a new word to its expanding lexicon. The New York state Department of Financial Services has issued a public notice, that it has launched an inquiry into appropriate regulatory guidelines for virtual currencies. The NYDFS established from the outset that it was important for regulators, to allow for new tech and industries to flourish while ensuring that consumers and national security remains protected. The term ‘Bitlicence’ will cover specific virtual currency transactions and activities and would cater for anti-money-laundering measures as well as consumer protection requirements for licensed entities.
Bitcoin is a virtual currency that isn’t backed by a central government, but can be traded anonymously and used to buy goods and services. It is currently being abused by the underworld, but its spirit and integrity needs to be maintained. Its anonymous nature worries regulators, but there are increasing lack of privacy issues and the fact that we now live in a world, where the lack of having some form of digital identification such as a Facebook account can be viewed as increasingly suspicious, an assumption that targets the motives of innocent people, who in the majority of cases simply wish to remain private.
Kashmir Hill from Forbes, writes “continuing to navigate life without having this digital form of identification, may be like trying to get into a bar without a driver’s license”. Scary stuff.. But think about it, if we are well and truly down that particular road, isn’t it good to have options? What’s wrong with using a currency that has a low inflation risk, a low collapse risk and is easily portable and untraceable?
NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security. Failing to do so would not only threaten the virtual currency industry as a legitimate business enterprise, but could also potentially expose virtual currency firms to extraordinarily serious criminal penalties.
This latest development, was in the works for some time as we saw in August, NYDFS broadcasted its intent to regulate the industry, when it subpoenaed 22 Bitcoin related tech firms, in an attempt to gain information about their manner of operations. Bitcoin has seen various highs and lows, but last Thursday its value rose to over US$400, a doubling of its value the previous month. There is a case for compliance and a clampdown on anti- money laundering. Inputs.io a Bitcoin wallet provider was hacked and Bitcoins were stolen and then there was the scandalous shutdown of a Chinese exchange that resulted in US$4.1 million worth of digital currencies disappearing.
It is important to realize that most countries have stringent financial services compliance regulations in place, could be argued that some of these could be skewed towards regulating the Bitcoin industry. The question is what would a BitLicense do exactly and would actually help or hinder the crypto currency. NYDFS will attempt to determine in the coming months what types of virtual currency transaction activities should fall under the remit of a bitlicence. It will also debate whether firms will be required to follow specially tailored anti-money laundering guidelines as well as consumer protection and bespoke regulatory examination requirements.
Though it is a sign of things to come, NYDFS is stressing that its only engaging in a broad-based inquiry at the moment. It said the “virtual currency industry represents a new frontier in electronic commerce”, and it is important that “regulators obtain the necessary information through rigorous deliberate fact-finding efforts in order to appropriate guardrails for the industry”. A bitlicence would also cover all crypto currencies including new ones that emerge later on down the line.
Hayden Richards is Contributor of IntelligentHQ. He specialises in finance, trading, investment, and technology, with expertise in both buy-side, sell-side. Contributing and advising various global corporations, Hayden is a thought leader, researching on global regulatory subjects, digital, social media strategies and new trends for Businesses, Capital Markets and Financial Services.
Aside from the articles, interviews and content he writes for IntelligentHQ, Hayden is also a content curator for capital markets, analytic platforms and business industry emerging trends. An avid new media explorer Hayden is driven by a passion for business development, innovation, social business, Tech Trading, payments and eCommerce. A native Trinidadian, Hayden is also a veteran, having served with the Royal Air Force Reserves for the past 10 years.
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