Bitcoin exchanges may soon be coming to the Empire State, but such exchanges will be subject to strict regulation. The New York State Department of Financial Services (NYSDFS) stated that it will weigh proposals for a regulated virtual currency exchange. Companies can now submit applications and proposals to manage virtual currency exchanges in the state, a process the NYSDFS called “the formal commencement of a regulatory process.”
There has been a call for greater regulation after a number of problems with Bitcoin exchanges have emerged. Mt. Gox, which used to be the largest Bitcoin trader, filed for bankruptcy after criminals allegedly stole $400 million in bitcoins. Simultaneously, a number of hackers purport to have broken into the files of Mark Karpeles, Mt. Gox’s CEO, and found evidence that the loss may have been at least in part due to financial fraud. Another exchange, Flexcoin, closed after claiming to have lost $600,000 in bitcoins after being hacked. The CEO of a third exchange, Charles Schrem of BitInstant, was charged at the beginning of the year with enabling transactions for illicit drugs with bitcoins.
New York’s move to implement regulation is not alone. Last year, the US Treasury Department stated that they had to collect information about customers because they were considered money transmitting businesses. The NYSDFS stated that it will probably consider proposals and applications for other kinds of virtual currency firms, such as miners or companies that solve complicated mathematical problems that allow them to create new blocks of bitcoins.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.