New York's Lawsky Proposes Lighter Regulations for New Bitcoin Companies

Register now

New York financial regulator Benjamin Lawsky revised his proposal for policing virtual-currency companies to eliminate some rules that Silicon Valley claimed would crush the fledgling industry.

Lawsky's initial proposal in July drew criticism from entrepreneurs who are trying to turn bitcoin, the most popular digital currency, into a viable commercial proposition. In response, Lawsky made changes including the creation of a transitional "BitLicense" tailored to new businesses.

"We believe that these proposed changes are sensible and help us strike an appropriate balance between permitting innovation to proceed, while at the same time strongly protecting consumers and helping root out illicit activity," Lawsky said in prepared remarks for an event in Washington today.

The question of how and whether to regulate bitcoin has confounded regulators around the world since it emerged in software form in 2009 from a paper authored by an anonymous computer scientist and cryptographer. While it's garnered limited use among consumers, proponents have great enthusiasm for the currency.

Lawsky's new proposal would grant new companies a two-year transitional license before they're subject to full regulation.

"That transitional BitLicense will help provide start-ups an on-ramp as they build up their operations," he said.

Licensees will still have to comply with anti-money laundering requirements in existing law, which would curb bitcoin's appeal as a tool for illicit finance, Lawsky said. The department abandoned a rule that would have required companies to obtain addresses for all parties to a transaction. Now, they will have to do so only for account holders.

For reprint and licensing requests for this article, click here.
Compliance Digital banking Law and regulation Technology