New York financial authorities said Tuesday that they would soon begin accepting applications for virtual currency exchanges including those dealing in bitcoins, in a sign of regulators’ growing interest in the technology.
Approved applications will ultimately have to adhere to a proposed regulatory framework that New York plans to enact for virtual currency firms operating in the state. That framework will be developed no later by the end of June, New York’s Department of Financial Services announced Tuesday.
New York recently held hearings on a proposed regulatory framework. Financial regulators in the state started looking at the use of Bitcoin and other virtual currencies last year.
News of the regulations comes following the fall of Tokyo-based Mt. Gox, previously the largest exchange for buying and selling bitcoins, likely due to a hacking attack and mismanagement.
“The recent problems at Mt. Gox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges, including robust standards for consumer protection, cyber security, and anti-money laundering compliance,” said Benjamin M. Lawksy, New York’s superintendent of financial services, in a statement.
“BitLicensing” in the offing
The state’s regulations could include the development of a “BitLicense” for virtual currency firms operating in the state. New York’s department of financial services is also looking to consider applications for other types of virtual currency firms beyond exchanges, which may include payment processors or storage services.
Companies may immediately submit formal proposals and applications to operate virtual currency exchanges to help expedite the process of establishing greater oversight for the industry, the department said.
The process for evaluating the proposals may include discussions with the department to ensure that the exchanges include robust consumer, cyber security and anti-money laundering protections, the department said.
In explaining its move, the department cited risks associated with a technology that are unlikely to go away. “Turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators,” Lawsky said.
The Bitcoin Foundation, a nonprofit which advocates for the use of Bitcoin, did not immediately respond to comment on New York’s announcement.