New York finance regulator voices backing for Bitcoin

Posted on Thursday, 30th January 2014 @ 10:19 AM by Text Size A | A | A

New York finance regulator voices backing for Bitcoin
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Benjamin Lawsky, the superintendent of financial services in New York whose tough stance on money laundering wrung a $340m settlement from Standard Chartered, has said Bitcoin has reached a “tipping point” where its potential benefits outweigh the risks of illegal activity.

The backing from one of the finance industry’s more aggressive regulators, in a video interview with the Financial Times, comes as Mr Lawsky held a second day of hearings into how to regulate, rather than shut down, the growing virtual currency.

This week the US Department of Justice charged one of Bitcoin’s earliest and most flamboyant promoters, Charlie Shrem, with helping funnel money to drug dealers and buyers on the underground website Silk Road, which was closed by the FBI last year.

But Mr Lawsky said the arrest suggested that Bitcoin was moving into an era where law-abiding entrepreneurs were eager to abide by clear regulations on money laundering.

“My hope is that Bitcoin is very much at a tipping point and is moving from an earlier phase when it was dominated by some individuals who were more interested in the illicit nature of it, and what they could hide from people, and moving into a phase where it is more mainstream and will start to realise a lot of the benefits of digital currency,” he said.

The upbeat tone of Mr Lawsky’s comments contrasted with testimony on Wednesday from Richard Zabel, deputy US attorney for the southern district of New York, who said the ease of moving large sums of money with Bitcoin meant it “can be a magnet for criminality”.

“Virtual currency expands the geographic footprint of criminal activity and at the same time invites more criminal participants,” Mr Zabel said.

Mr Lawsky’s department of financial services wants to make New York the first state in the US to issue clear guidelines to virtual currency businesses, which must register as money transmitters in most states if they offer financial services in Bitcoin. Registration requires compliance with anti-money laundering rules, including checking customers’ identities and monitoring for suspicious transactions.

The hearings heard on Monday from several Bitcoin investors and entrepreneurs, including the Winklevoss twins and venture capitalist Fred Wilson, who argued that tailored regulation was needed to tame what Cameron Winklevoss called “the wild west” of virtual currencies.

Mr Lawsky received expanded powers to protect consumers and tackle money laundering when the Department of Financial Services was created through a merger of other regulators three years ago.

“Money laundering is something we are very serious about. Federal prosecutors are clearly very serious about it, and we will have to keep working on that angle as well,” he said in an interview after the first day of his Bitcoin hearings.

Mr Lawsky and other DFS staff expressed an interest in the potential benefits of Bitcoin as a method of moving money more quickly and cheaply than can be done in the current banking system. Panellists touted other benefits for merchants who accept a digital currency.

“We are not going to dilly-dally,” Mr Lawsky told the FT. “Our hope is to move relatively quickly so we can give some certainty to businesses. My experience has been that businesses can deal with regulation. What they can’t deal with is uncertainty.”

One option under discussion is a special “bitlicence” tailored for virtual currency companies.

The aim, Mr Lawsky said, was “to make sure that Bitcoin or other virtual currencies are thriving, not because they are a safe haven for money laundering but because they offer a lot of potential wonderful benefits down the road”.
He added: “We would love to make New York a place where these companies come – a hub – and continue New York’s thriving in the technological area.”


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