New York issues first bitcoin license, brings consumer protection

Regulators hope the licenses will help build consumer trust in virtual currencies

New York State's financial regulator has issued its first bitcoin license, bringing consumer protection, compliance and cybersecurity guidelines to what still is very much the Wild West of the financial industry.

The BitLicense imposes some of the same conditions on companies operating with virtual currencies such as bitcoin as it does with institutions handling conventional currencies.

The license was issued to Circle Internet Financial, a startup that's received millions of dollars in funding from venture capital firms including Goldman Sachs and IDG Capital Partners. The latter company is a subsidiary of International Data Group, the parent of IDG News Service.

The license will allow Circle to offer a version of its mobile payments system in bitcoin in addition to U.S. dollars.

"Issuing the first BitLicense is an important milestone in the long-term development of the virtual currency industry," Anthony Albanese, New York State's acting superintendent of Financial Services, said in a statement.

Earlier this year, the state issued its first license to a bitcoin exchange, but it wasn't the BitLicense. ItBit chose to register as a trust company -- something that brings a stricter set of rules and regulations, The New York Times reported at the time.

Bitcoin's shine has been somewhat tarnished in the two years since the value of the cryptocurrency hit fantastic highs and people piled into bitcoin "investments." Today, the currency is worth substantially less but while the hype has gone, real interest remains in bitcoin or the idea of virtual money.

At the TechCrunch Disrupt conference in San Francisco on Monday, bitcoin enthusiasts said they believe the currency will ultimately succeed because the underlying technology remains strong.

For that to happen, consumers will need to be able to trust bitcoin holdings -- something that New York's BitLicense is meant to encourage.

"Putting in place rules of the road that help protect consumers from loss or theft and root out illicit activity is vital to building trust in this new financial technology," said Albanese.

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Martyn Williams

IDG News Service
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