Cloud Hosting

New York has become the first state in the US to lay down regulations and rules for the trade of virtual currency including Bitcoin.

The New York Department of Financial Services (DFS) released the new rules on Wednesday. Outlined by Benjamin M. Lawsky, Superintendent of Financial Services, the new regulations will affect traders which accept, sell or buy virtual currency.

The rules have been formed after a two-year long investigation into cryptocurrency. The "BitLicense" regulations (.PDF) contain consumer protection, anti-money laundering compliance and cybersecurity rules tailored for companies using virtual currency, including Bitcoin.

At the BITS Emerging Payments Forum in Washington, DC on Wednesday, Lawsky said digital currency highlights the dynamic nature of financial markets and technology, and the pace of change is only doing to accelerate in the years to come. As a result, "regulators need to be ready to meet that challenge."

"We have a responsibility to regulate new financial products in order to help protect consumers and root out illicit activity. That is the bread and butter job of a financial regulator," Lawsky said.

"However, by the same token, we should not react so harshly that we doom promising new technologies before they get out of the cradle."

Lawsky noted that attempts to ban Bitcoin would likely fail, as banning computer code is nigh-on impossible. Instead, the financial regulator said the key is balancing the protection of consumers, the reduction of fraud and still permitting innovation breathing space.

If companies use virtual currency and are holding on to customer funds, they need to apply for a license. However, app developers who are developing software do not need to -- as the department will not need to act as a financial intermediary. Lawsky commented:

In addition, companies will need the approval of the financial regulator if they make substantial changes to their business models or products, as well as the inclusion of new controlling investors. However, they will not need permission before seeking funding through investment rounds or small software updates.

Go here to see the original:
New York finalizes Bitcoin trading rules | ZDNet