Existing regulations will apply to license digital currency firms in New York. This is happening even though law enforcement is cracking down on money laundering cases and are taking steps to prevent future money crimes.
Benjamin Lawsky, the superintendent of NY Department of Financial Services said,
“We do not have to throw out all of our existing rules for money transmitters or banks, which have generally served consumers well when vigorously enforced.”
This means that existing regulations for banks and other money operators will apply to Bitcoin. Lawsky further says,
“Certain aspects of virtual currency could dovetail with existing regulations.”
Lawsky had been asked by Bitcoin enthusiasts in January not to write new rules for digital currencies. This is because new regulations could stop the virtual currencies from keeping their promise to ensure lower costs and less fraud than existing payment systems which are controlled by JPMorgan Chase & Co. and Visa Inc.
Lawsky said that New York would probably have to issue some type of BitLicense that can adapt the rules to digital currencies. During the January 28 hearings, law-enforcement officials had urged the state to enact strict anti-money-laundering regimes on virtual currency firms.
Federal Existing Regulations
Instead of creating a whole new set of rules, New York is considering adapting existing regulations on money laundering. Lawsky said that having rules such as knowing who your customer is, will require virtual currency firms to be aware of their client’s suspicious activities. In addition, combined with the Block chain, aka the public ledger, it will make this process easier.
Lawsky says that this approach
“is not overbearing but gives law enforcement what it needs.”
In March, the Treasury Department’s Financial Crimes Enforcement Network had said that digital currency firms should register with Fincen and might be regulated as money transmitters. This caused other states to worry about how to deal with virtual currencies.
Transactions that Appear Suspicious
At the Washington conference, Fincen director Jennifer Shasky Calvery, said that there are a lot of digital currency exchanges that are not registered on the Fincen network. Companies who have registered are “doing a great job” by reporting any suspicious activities/transactions, which is the main condition of U.S money-laundering rules.
Adding on to this, Calvery also said that people who exchange dollars for Bitcoins in a private transaction online or in person might need to register with Fincen. She said this is because
“essentially you’re taking money from the public and giving them value in return.”
On Feb. 6, two Florida men were arrested on charges of money laundering after allegedly selling Bitcoin to undercover cops who said that the coins would be in fact used to buy stolen credit-card numbers. The undercover cops said that they found the Florida men on LocalBitcoins.com.
Superintendent Lawsky said that it is likely that the department will include “a strong set of specially tailored, model consumer-disclosure rules” for virtual currency business. These could include for example that the buyer should be aware that transactions made through Bitcoin are irreversible.
Rules for Safety
Money transmitters like MoneyGram International Inc. and Western Union Co. have to follow regulations on safety also. New York is debating whether licenses should be limited to only virtual currencies that have public ledgers or if there should be limits to digital currencies that conduct transactions anonymously says Lawsky.
Whether or not that happens, at least we now know where New York stands with Bitcoin.
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