New York’s Superintendent of Financial Services, Benjamin M. Lawsky, has issued a public order that confirms the state is now accepting applications for digital currency exchanges.
Perhaps most notably, however, was that Lawsky indicated that these businesses will be regulated under new New York regulation, which he committed to having in place by the end of the second quarter of 2014.
In his remarks, Lawsky struck his usual balance of at once recognizing the promise of digital currencies and stressing that related business activities need to be conducted in a responsible and lawful manner.
Wrote Lawsky in the release:
“The recent problems at Mt. Gox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges, including robust standards for consumer protection, cyber security, and anti-money laundering compliance.
Lawsky also disclosed new information for those seeking to apply for a New York-based exchange, indicating that interested firms can now immediately submit proposals and applications. However, he noted that such submissions represent a formal commitment to the regulatory process.
Further, Lawsky suggested that New York will not be bound by commitments that prevent it from taking what he considered appropriate action to safeguard consumers during this process. Lawsky noted that its policies for digital currency exchanges could be later modified to enhance consumer protection, cybersecurity or anti-money laundering initiatives.
“Turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators.”
Approved applications will need to adhere to the regulatory framework New York plans to introduce later this year.
A long-awaited move
The move puts in motion an idea that first arose during the NYDFS bitcoin hearings in January. There, major digital currency investors made the case that New York should consider hosting such businesses, both for the job creation benefits and because the industry was in need of more oversight, though this suggestion has not been without criticism.
Major bitcoin business leaders had since hinted at dialogues with state regulators on the matter.
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