The New York Department of Financial Services (NYDFS) is considering handing out BitLicenses to Bitcoin traders.
Bitcoin, the peer-to-peer digital currency that functions without the intermediation of any central authority, was introduced in 2009. The virtual currency has been under a lot of scrutiny by authorities as many market observers believe that the service is popular due to its role in unreliable online markets.
However, the use of Bitcoins is rapidly increasingly as payment for legitimate products and services. Moreover, merchants have an incentive to accept Bitcoins because transaction fees are lower than the two percent to three percent, which is usually levied by credit card processors.
NYDFS has now announced its plans to hold discussion in the next few months to regulate Bitcoin. One of the topics of discussion will be whether to start issuing BitLicenses to businesses, which are supposed to comply with a possibly new set of financial statutes created exclusively for digital currencies such as Bitcoin.
"Virtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions. That said, NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security. Failing to do so would not only threaten the virtual currency industry as a legitimate business enterprise, but could also potentially expose virtual currency firms to extraordinarily serious criminal penalties," per NYDFS.
BitLicense will allow virtual currency to be exchanged within businesses in New York alone. Businesses will also require complying with relevant anti-money laundering and consumer protection laws. Merchants will also have to pay a fee to obtain a BitLicense.
However, not all merchants agree. "A BitLicense does not make sense, because for every other type of payment we offer our customers, we don't need a special license," said David Lee, the general manager of Green Avenue Market, a family run enterprise.
Some customers and businesses may prefer Bitcoins and others may prefer more traditional ways of payments such as using cash or credit/debit cards. As such, NYDFS may come across a lot of questions regarding the advantages and disadvantages of issuing BitLicenses.
