August 24, 2016
NY Licenses Bitcoin Exchange
May 12, 2015
The State of New York late last week licensed new Bitcoin exchange itBit as the first such legally regulated entity in the U.S. The company was not, however, granted the BitLicense being formulated by Benjamin Lawsky, superintendent of the New York State Department of Financial Services (NYDFS). Final formulation of the BitLicense is still ongoing. The New York City-based digital currency exchange and trading platform said it has received a trust company charter from the state, making it the “only U.S.-chartered and supervised bitcoin exchange able to offer unique protection and security for customers in full compliance with New York and federal law.”
A trust company charter, according to experts, presents an even more rigorous compliance regime than the soon-to-come BitLicense, but, for itBit, becoming a trust solves a big problem plaguing digital-currency service providers. In the absence of settled regulation, U.S. banks have been reticent to take Bitcoin companies on as customers. As a trust, itBit is permitted to hold its customers’ funds itself. itBit’s application was pending for more than a year and NYDFS said in a statement that it put the company’s AML procedures, capitalization, consumer protections and cybersecurity standards under the microscope.
“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 Lawsky. “The technology behind Bitcoin and other virtual currencies could ultimately hold real promise and it is critical that we set up appropriate rules of the road to help safeguard customer funds. Indeed, we believe that regulation will ultimately be important to the long-term health and development of the virtual currency industry.”
itBit launched in the U.S. last week with news of its licensure and of a $25 million round of Series A financing. The company also filled several board seats with high-profile directors including former New Jersey Senator and presidential candidate Bill Bradley and former FDIC Chairman Sheila Bair.