On November 14, 2013, New York State Department of Financial Services (NYDFS) Superintendent Benjamin M. Lawsky announced that the NYDFS will take the next step in its “inquiry into the appropriate regulatory guidelines for virtual currencies” by holding a public hearing to “consider the possibility and feasibility of NYDFS issuing ‘BitLicenses’ specific to virtual currency transactions and activities.” The first step of the inquiry involved the service of subpoenas for documents on 22 virtual currency-related companies in August. Although the announcement reiterated the NYDFS’s concern that “the cloak of anonymity provided by virtual currencies [may] help support dangerous criminal activity,” and made reference to the recent arrest of alleged Silk Road Operator Ross William Ulbricht, it also stated that “[v]irtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions.” To protect the virtual currency industry’s long-term interest in legitimacy, therefore, the NYDFS has taken it upon itself to “put place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security.”
The “public hearing will review the interconnection between money transmission regulations and virtual currencies,” and explore how to tie anti-money laundering and consumer protection components into the proposed BitLicense issuance process. Other issues to be examined include what types of virtual currency transactions and activities should require BitLicenses, and whether entities that are issued a BitLicense should be required to follow specifically-tailored anti-money laundering, consumer protection, and regulatory examination guidelines. Lawsky notes that regulators “have a responsibility to take a hard look at these issues” given increased demand from consumers and investors, but carefully qualifies the NYDFS’s current stance on virtual currency regulation, stating that “NYDFS has not made a determination at this point about the necessary regulatory guidelines for virtual currencies.” The hearing will take place in New York City in the coming months at a time and location to be determined.