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New York unveils first-ever regulations on Bitcoin

New York unveils first ever regulations on Bitcoin


The rules say that anyone conducting "virtual currency business activity" needs to have a BitLicense. That sort of activity includes things like buying and selling virtual currency as a customer business, storing virtual currency on behalf of others, or issuing a virtual currency. Merchants and customers who use virtual currencies exclusively for the transactions of goods and services, however, are exempt.

If you want to start a virtual currency exchange or operate an online wallet service in the state of New York, you're going to need a BitLicense, but if you just want to buy or sell a pizza with virtual money, it's still possible to do so without first getting government approval.

Applying for a BitLicense involves disclosing personal and financial information for top company officials, undergoing a background check, paying a fee, and providing details about the structure and business goals of the company. If the regulators see any shady behavior, licenses can be either suspended or revoked entirely following a hearing.

The proposal also introduces capital requirements, which are rules that nearly all financial institutions are required to follow requiring them to have a certain amount of cash (or other assets) on hand to ensure that a market downturn or bad business decision doesn't suddenly sink the whole company and its customers’ investments with it. The minimum amount of capital each virtual currency financial firm will be required to carry will be determined by regulators on a case-by-case basis.

In addition, all firms applying for BitLicenses will be required to comply with a set of policies— including the preservation of all financial records for at least a decade, the submission of quarterly financial statements, the verification of customers’ real-world identities, and the logging all user transactions—which are designed to combat fraud and money laundering, as well as rules designed to ensure against data breaches and protect customers' privacy.

Interesting, the rules appear to technically prohibit virtual currency firms from taking the revenue they earn from virtual currencies and then investing that money back into virtual currencies. Earnings can only be sunk into "high-quality, investment-grade permissible investments … denominated in United States dollars." This is a category that includes investment vehicles like money market funds, state or municipal bonds, and government securities. Notably absent from this list: virtual currencies like Bitcoin.

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Once it's regulated and requires licenses it's the same as other money.

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