New York to Regulate Bitcoin: Is the Cryptocurrency Biz
Like “the Wild West?”
Original release date was January 30, 2014. Original
text is below:
Yesterday, the New York State Department of Financial
Services (DFS) concluded a two-day
fact-finding hearing on how to regulate Bitcoin and other
virtual cryptocurrencies. The purpose of the hearing was to
consider whether or not Empire State regulators should have a
direct role in overseeing the use of virtual cryptocurrencies, or
if existing federal regulations suffice.
In his opening remarks, New York State Superintendent of Financial
Services Benjamin M. Lawsky made it clear that the question wasn’t
so much if New York should regulate
cryptocurrencies, but how. “Right now, the regulation
of the virtual currency industry is still akin to the Wild West,”
said Lawsky. “That lack of regulation is simply not tenable for the
long-term.” Lawsky also expressed a desire not to “clip the wings”
of a promising new technology, and acknowledged the potential of
cryptocurrencies to revolutionize the money transmission
industry.
The first panel consisted of some of the leading investors and
venture capitalists in the world of Bitcoin,
including Barry
Silbert of SecondMarket and the Bitcoin Investment
Trust, Jeremy
Liew of Lightspeed Venture Partners, Fred Wilson of Union
Square Ventures, and Cameron and Tyler
Winklevoss of Winkelvoss Capital Management. All five
participants urged the DFS to take a light touch to avoid quashing
innovation or driving the industry abroad.
When one panelist suggested that small upstarts could outsource
their regulatory compliance duties to other firms, Fred Wilson of
Union Square Ventures told the panel, “That sounds like a terrible
idea.” He continued:
You’re talking about introducing all of the costs into the system
that we’re trying to take out of the system. Let’s just understand
what we’re trying to do with Bitcoin. We’re trying to create a
world where transactions can move globally for free. And making
these companies hire some outsource compliance firm is a bad
idea.
Members of the DFS voiced concern that Bitcoin could be used to
facilitate narcotrafficking and other illegal activities, as it did
in the case of Silk Road, an online drug bizarre that
was shut
down by the government in October. On Monday, the day
before the hearings began, Charlie Shrem, the founder and CEO of
BitInstant and a major figure in the Bitcoin community,
was arrested on
charges of using cryptocurrency to launder money. The Winkelvoss
brothers, who participated in the hearing, were major investors in
Shrem’s firm.
Jeremy Liew of Lightspeed Venture Partners told the panel that
these cases demonstrate that additional laws and regulations to
protect against money laundering aren’t necessary. “Law enforcement
did a fantastic job using existing regulations,” said Liew. “It
appears to have been controlled.” At a later session, Cyrus R.
Vance, Jr., the district attorney of New York County, and Richard
B. Zabel, the deputy U.S. attorney for the Southern District of New
York, argued that these recent prosecutions pointed to the need for
more oversight. “There were hundreds of people engaged in criminal
conduct dealing with these entities and dealing in virtual
currencies and they haven’t all been arrested,” said Zabel.
But what sorts of rules are needed to help combat money laundering
that don’t already exist on the federal level? The
participants offered few specifics. Bitcoin investors expressed
hope that any new regulations will be written broadly enough that
they don’t halt innovation or drive the industry abroad.
“Regulators are going to have to come up with a way to treat
Bitcoin that is balanced and thoughtful,” said Barry Silbert, “but
also recognize that this is a global phenomenon.”
“Bitcoin challenges the duopolistic incumbents,” said Tyler
Winklevoss, “and I think that’s very healthy and I think that’s
very American and it’s what we should all be striving for.”
About 3 minutes.
Related:
Wall Street’s New Cryptocurrency Headquarters: Inside the Bitcoin
Center NYC
Original release date: January 28, 2014.
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