A few weeks before New York officials are expected to issue a final regulatory framework for bitcoin, the state has issued a trust company charter to virtual currency exchange itBit.
Obtaining a trust company charter subjects itBit to the same state and federal regulations that apply to other financial services firms, according to the New York State Department of Financial Services. For example, deposits made to itBit must be fully insured. To offer this guarantee, itBit teamed up with an unnamed U.S. bank to insure client accounts up to US$250,000.
Qualifying for the charter, which itBit applied for in February, means the exchange’s cybersecurity, consumer protection and capitalization plans, among other areas, were reviewed by the New York financial services department.
New York State Department of Financial Services Superintendent Benjamin Lawsky began looking into regulating bitcoin exchanges in 2013 and is expected to release a final set of regulations later this month. He issued draft proposals for bitcoin regulations for public comment last year.
Regulation can help the virtual currency industry grow while protecting customer funds, Lawsky’s office said in a press release Thursday.
ItBit operates in New York and Singapore and targets large investors. Knowing that itBit complies with U.S. financial laws will help assure customers that their deposits are secure, the New York City startup said in a blog post Thursday.
Hackers have targeted bitcoin exchanges in recent years and made off with bitcoins worth millions of dollars. Mt. Gox was the world’s most prominent exchange until it folded last year after attackers stole $474 million worth of bitcoins. This past January, Bitstamp lost $5 million worth of bitcoins in an attack.