New York Probing Bitcoin Activities

Updates

By: Michael Whalen

As a follow-on to our July 23 post on the trajectory of Bitcoin regulation, New York’s financial institutions regulator recently issued subpoenas to a number of Bitcoin participants. The subpoenas request documents covering a wide range of subjects, including pricing, anti-money laundering, data security, privacy, consumer protection, and money transmission. In tandem with the subpoenas, the New York regulator published a memorandum announcing it has launched an inquiry into the appropriate regulatory guidelines that should be put in place for virtual currencies. The memo expresses concern that virtual currency exchangers may be engaged in money transmission without a New York license. It goes on to say that existing money transmission regulations may not fit virtual currencies and that new guidelines tailored to the unique characteristics of virtual currencies may be more appropriate. New York appears to be on to something here as most of the 40+ state money transmitter laws were written for Western Union-like store fronts, not the virtual world or virtual currencies like Bitcoins. Although these state laws are not uniform, the first state to break the ice by issuing regulatory guidelines specific to virtual currencies will certain influence other states.

Based on this recent flurry of subpoenas, New York could end up being the first state to specifically regulate virtual currencies like Bitcoins. That being said, any such regulations do not appear imminent since New York regulators remain in information gathering mode. We’ll continue to keep you posted.

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