Worried the virtual-currency does not comply with state money-transaction laws and will be used for illegal activities, New York’s banking regulator has issued subpoenas for about two dozen companies involved in the billion dollar crypto cash market.
Companies will be asked to provide the New York Department of
Financial Services (DFS) with data and information, as they
prepare to draft state guidelines on virtual currencies, the WSJ
reported, citing familiar sources.
"If virtual currencies remain a virtual Wild West for
narcotraffickers and other criminals, that would not only
threaten our country's national security, but also the very
existence of the virtual currency industry as a legitimate
business enterprise," according to a draft memo obtained by
the daily.
The memo will be released Monday and will also address customer
protection measures.
“We believe that – for a number of reasons – putting in place
appropriate regulatory safeguards for virtual currencies will be
beneficial to the long term strength of the virtual currency
industry,” Benjamin Lawsky, head of the DFS, wrote in a
drafted letter to the WSJ.
Coinbase, BlitIntstant, and Coinsetter were named as companies
that have received subpoenas.
The companies haven’t been accused of any wrongdoing, but will be
asked to provide the DFS with information and data.
The subpoena is "an opportunity for companies in our space to open up a much needed dialogue with regulators,” as Jaron Lukasiewicz, chief executive of Coinsetter, wrote to WSJ in an email.
"… most companies are working to legitimize Bitcoin and want
to build bridges that help regulators understand and support
these financial innovations,” Lukasiewicz added.
Last week, a Texas judge ruled (link) that Bitcoin is a formal
currency while presiding over a case concerning a Ponzi
scheme.
The round of subpoenas are also aimed at gleaning information
about how the companies are dealing with individual investors who
may be attracted to the novelty of virtual currencies, but may
not be sophisticated enough to understand the risks associated
with them.
Bitcoin currency provides an alternative to traditional,
government issued currency, is open-source software, and uses
peer-to-peer connections for monetary transactions to avoid
centralized authorities, and provides an alternative to
traditional currencies
Introduced in 2009, Bitcoin is already a billion dollar market,
mostly traded out of Tokyo. There are currently 7246 shares
trading at Mt. Gox, the largest international Bitcoin
exchange, for $104.51.
The currency holds no intrinsic value- there is no guarantee by a
central bank or the Federal Reserve – leaving it virtually backed
by digital thin air. The plan is to reach 21 billion Bitcoins by
2240, and more can be ‘made’ after by breaking them into smaller
units.