New York ponders “BitLicense” for virtual currency

“Serious people — in the technological and investment community — are taking virtual currencies seriously.” Those were the words of a senior New York financial regulator, who spoke on Tuesday to investors and Bitcoin enthusiasts as part of a two-day hearing process on the future of virtual currencies in the state.

In the speech, Benjamin Lawsky, superintendent of financial services for the state of New York, emphasized that regulators are taking an open view of the potential and pitfalls of currencies like Bitcoin, which are attracting endless speculation and hype, but also serious investments like the $25 million that VC’s recently poured into Coinbase.

Lawsky also noted that New York regulators are considering a “BitLicense” specially tailored for overseeing virtual currencies.

The issue is important because even though federal regulators appeared to bless Bitcoin in November, state governments still have the power to control money transmitters — and New York, the home of Wall Street, is the most significant state of all when it comes to financial matters.

Lawsky did not specify what exactly a “BitLicense” will entail, but he did refer to issues like theft, money laundering and ensuring that the investment and deposit process is transparent. While warning of the dangers of a “Wild West” virtual currency climate, he also pointed out the upsides of the rise of tools like Bitcoin:

Indeed, virtual currency could ultimately have a number of benefits for our financial system. It could force the traditional payments community to “up its game” in terms of the speed, affordability, and reliability of financial transactions

Lawsky’s remarks are just one part of a two-day process that will also showcase the views of Bitcoin boosters like Fred Wilson, the Winklevoss twins and Jeremy Allaire, as well as other regulators.

Prior to the hearings’ launch, the Bitcoin world got another reminder yesterday that the virtual currency hasn’t entirely shaken its shady reputation as a senior executive of the Bitcoin Foundation was arrested at JFK airport on charges of money laundering. Update: the executive resigned on Tuesday.

Meanwhile, as New York regulators wrestle with the best way to address Bitcoin, a similar process is underway in California, where many Silicon Valley companies are betting on the future of the virtual currency.

Featured photo courtesy stevanovicigor/Pond5