New York’s Department of Financial Services initiates Inquiry on Virtual Currencies

NY-DFSThe New York banking regulator has issued subpoenas to 22 companies associated with Bitcoin as part of an “Inquiry on Virtual Currencies”.

Via Forbes’ Kashmir Hill

A subpoena doesn’t mean criminal activity has taken place. A person familiar with the matter says the two-year-old department wants to make sure Bitcoin isn’t a conduit for illicit activities and is gathering information in order to decide whether to issue regulation for virtual currencies. The department has the authority to create regulation if there is no other primary regulator.

In addition to rooting out illegal activity, the department says it wants to make sure Bitcoin company customers’ funds are “safe and sound,” expressing concern about consumer complaints “about how quickly virtual currency transactions are processed.”

The virtual currency Bitcoin has already been getting lots of attention on the federal level. The IRS has been encouraged to make sure people pay tax on it. The FBI realizes it’s useful as a currency for illicit activity. The SEC has argued that it is indeed money and that people should go to jail for using it in Ponzi schemes. And the Department of Treasury has issued guidance for Bitcoin money transmitters. State regulators paying attention will help to further legitimize the currency, but it will also increase the start-up costs for Bitcoin money transmitters. The NYSDFS notes in its statement that “virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS.” That means ponying up bond money, as pointed out in the Wall Street Journal

Below are the companies subpoenaed.

  • BitInstant
  • BitPay
  • Coinabul
  • Coinbase Inc.
  • CoinLab
  • Coinsetter
  • Dwolla
  • eCoin Cashier
  • Payward, Inc.
  • TrustCash Holdings Inc.
  • ZipZap
  • Butterfly Labs
  • Andreesen Horowitz
  • Bitcoin Opportunity Fund
  • Boost VC Bitcoin Fund
  • Founders Fund
  • Google Ventures
  • Lightspeed Venture Partners
  • Tribeca Venture Partners
  • Tropos Funds
  • Union Square Ventures
  • Winklevoss Capital Management

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