New York's Department of Financial Services has issued the state's first charter for a bitcoin exchange, increasing the legitimacy of the virtual currency which is slowly moving from the fringes of the worldwide financial system into mainstream usage.
The first bitcoin exchange charter was granted to ItBit Trust, a startup company that gives the investors the ability to trade their dollars into bitcoins. ItBit began its operations under a charter that will allow it to legally function across all the 50 states.
In addition to receiving the charter, ItBit was also able to add three prominent names to its board of directors and pick up funding worth $25 million, boosting the company's standing and increasing the bitcoin's acceptance in the financial world.
The three new board members are former chairwoman of the FDIC Sheila Bair; former New Jersey Democratic senator and Senate Finance Committee member Bill Bradley; and Morgan Stanley and Fannie Mae director Robert Herz.
The charter, according to ItBit co-founder and CEO Charles Cascarilla, is a significant step in the ability of the burgeoning bitcoin industry to assure investors that their money will be properly and safely handled.
Due to the charter, ItBit will be subjected to audits of states and the required capital levels in case of failure. ItBit added that, through a deal with a certain bank in the United States, the accounts that are held in dollars will be protected by the Federal Deposit Insurance Corp.
Bitcoin is described as a decentralized digital currency which utilizes peer-to-peer technology in its operations, which avoids central authorities. Bitcoin could possibly have a significant effect on the industry of international money exchanges and transmissions, which currently have Western Union and PayPal as its dominant forces.
However, the broader technology of the digital currency could also possibly revolutionize the way people deal with money in the same way that the Internet revolutionized the financial world in general.
The digital currency continues to make its comeback, with two years since the crash of the Mt. Gox bitcoin exchange that left customers with no way to redeem their investments.
The Mt. Gox crash pushed the Department of Financial Services to begin drafting a "BitLicense" for bitcoin trading in New York.
"We have sought to move quickly but carefully to put in place rules of the road to protect consumers and provide greater regulatory certainty for virtual currency entrepreneurs," said Department of Financial Services head Ben Lawsky.
According to Cascarilla, ItBit worked with the New York Department of Financial Services for over a year to acquire the charter.
Photo: Zach Copley | Flickr
