The Mt. Gox Bitcoin debacle has led to New York State to implement a regulatory process for any virtual currency exchange that wishes to operate within the state.
New York's Department of Financial Services has issued a public order that the agency will start accepting formal proposals for any company wishing to operate an exchange, essentially ending the Wild West atmosphere that had held sway. Approved companies will receive a "BitLicense" and the state noted it will eventually consider accepting proposals for other types of virtual currency.
"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. We will continue to proceed swiftly and thoughtfully to provide rules of the road for reputable virtual currency firms seeking to conduct business on-shore in a responsible manner," said NYDFS Chairman Benjamin M. Lawsky.
Lawsky's order represents the formal introduction of a virtual currency exchanges being governed by a regulatory body in New York. He added that the state will ensure robust consumer, cyber security and anti-money laundering protections in an attempt to forestall a recurrence of the Mt. Gox situation.
The NYDFS will begin to construct a framework under which these exchanges will operate. The agency expects to formally introduce its rules and regulations no later than the end of June. Virtual currency firms interested in setting up shop in New York may immediately begin submitting their proposals.
Lawsky pointed out that regulation is needed as these currencies are now here to stay, so consumers need to be protected.
"Consumers should understand and receive appropriate disclosures about the potential risks associated with using virtual currencies or any other financial product, but the fact is that virtual currencies are unlikely to disappear entirely," he said.
Bitcoins had so far evaded regulation because the currency is not tied to any bank or nation, but is instead traded on a peer-to-peer basis.
Bitcoin itself has been the center of controversy since it was created in 2009. Banks and nations have fretted over what it could do to traditional currencies and the bankruptcy of Bitcoin exchange Mt. Gox last month is causing further worries over the viability of the currency and the fact that the largest such exchange simply lost or could not find 850,000 Bitcoins priced at the time at around $500 billion.
Bitcoin exchange Mt. Gox filed for Chapter 15 U.S. bankruptcy protection on March 9, a follow up to a similar filing in Japan in late February.
