The New York State Department of Financial Services issued a release in mid-November that it plans to hold a public hearing on virtual currency regulation in New York City “in the coming months at a time and location to be determined.”
Topics up for discussion include licensing for Bitcoin businesses that are deemed compliant with a potential whole new set of financial rules. The release suggests those news laws would include anti-money laundering regulations and consumer protection requirements.
On the agenda also will be a review of money transmission regulations and how effective they are in addressing digital currencies.
Other questions revolve around licensing: Should licensed businesses be forced to follow anti-money laundering guidelines? Should they be required to follow consumer protection rules? Should they have to take an exam to get licensed?
This move comes as governments internalize an understanding of Bitcoin and continue to try to corral and regulate what is an unregulated and decentralized currency.
The release itself states that the NYDFS feels it has a responsibility to look at issues surrounding virtual currencies and extends an invitation to the virtual currency industry to cooperate along with the inquiry.
Some analysts fear that the mainstreaming of Bitcoin is going to lead to regulation, which will undercut all of its benefits and strip it of value. Legitimizing the currency might actually cause it to suffer, the thinking goes.
Others reject that arguments and suggest that a global view is necessary to see Bitcoin’s real value. Bitcoin could be a real boon to citizens of countries where governments control exchange rates. And to drive that point home, much of the recent rise in Bitcoin’s value seems to have come from Chinese users.
Another major concern for New York is online criminal activity. The inquiry was called in large part due to evidence that the anonymous nature of Bitcoin and other digital currencies have supported drug smuggling, money laundering, weapons trades and child pornography.
And while virtual currencies have legitimate purposes in commerce, the release states, “NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in places appropriate guardrails that protect consumers.”
No date is given for when the NYDFS plans to announce this hearing.