As early as October of this year, Bitcoin entrepreneurs will need a BitLicense to cruise the virtual currency highway in New York State. The NY Department of Financial Services is in the process of establishing regulations focused primarily on consumer protection, money laundering and cybersecurity and what they come up with will undoubtedly influence other states’ rulings.
The regulations will affect companies that receive or transmit virtual currency on behalf of consumers and exchanges and firms that perform retail conversion to cash or from cash to virtual currency, among others. Individuals or merchants that simply accept payment in Bitcoin — such as Dell, Expedia, Cheapflights.com, etc. — won’t need a BitLicense, but the companies they use to turn Bitcoin into fiat cash definitely will.
Some Bitcoin champions think this is exactly the kind of oversight the currency needs to give it stability and credibility: If the soon-to-be mandated capital requirements, asset protection, reporting and strong cybersecurity measures had been in place, it’s quite likely the Mt. Gox meltdown could have been avoided.
Deep-pocket organizations will be able to absorb the cost of following the new regulations, but startups and venture capitalists are protesting against what they see as a significant burden. Libertarians and others enamored of Bitcoin’s once-vaunted anonymity have additional reasons to be incensed. Holders of a BitLicense will be required to record the names and addresses of their customers along with a description of every transaction and daily transactions in excess of $10,000 will need to be reported to the state. So much for anonymity.
(Note: The Trends Journal will soon be accepting bitcoins.)