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US regulators develop bitcoin rulebook

Published time: May 19, 2014 17:17
Reuters / Jim Urquhart

Reuters / Jim Urquhart

A group of US state regulators is working to develop the first ever bitcoin rulebook, stating that they hope to protect those who are using the virtual currency by introducing proper regulation.

Many US companies are now allowing customers to pay for goods and services with the virtual currency.

“We may be looking at some type of model definitions, or model laws or regulations, and very likely recommendations to either our federal colleagues or to Congress,” David Cotney, Massachusetts commissioner of banks, told Reuters during a public hearing about bitcoin on Friday.

Cotney took up his position as head of the new nine-member Emerging Payments Task Force in February. The collective has granted itself a year to complete the task of establishing the guidelines.

Bitcoin was denied currency status by the IRS in May, meaning that taxpayers must treat bitcoin as property for federal tax purposes.

Because bitcoin is not regulated by the federal government, US constituent states may be facing a labyrinth of rules to govern its usage.

The task force hopes to clarify operators that need to be regulated and those that don’t, Cotney told the agency.

“Who's in and who's out? So if we can offer that [it] would be a...big step,” he said. Cotney's group also examines other new payment technologies, including online money transfer service PayPal and mobile phone payment services.

From May 9, US politicians could begin accepting bitcoin donations. In February, US-based CheapAir became the first online travel agency to accept bitcoin as a form of payment for flights and hotel bookings.

However, recent disruptions have thrown the currency into the limelight. Mt. Gox – Tokyo’s most well known bitcoin exchange - filed for bankruptcy in February after losing some $US650 million worth of clients’ bitcoins. China then shut down two major trading platforms at the beginning of May.

Regulators say they want to ensure that usage of the cryptocurrency remains secure.

A member of the task force, New York-based Benjamin Lawksy, stated in January that his department was devising a “BitLicense” system in which California has expresed interest.

Many countries, including Russia, have warned against using bitcoin, while Denmark and China have banned virtual currency deposits.

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