Well, not mixed from the Bitcoin side of things. Dangerous, problematic, ridiculous, insane, absurd, Orwellian and archaic are just a few of the adjectives bandying around the comments under Benjamin Lawsky’s Reddit post of the proposed regulations. The New York Department of Financial Services Superintendent hopes the proposed rules strike a balance between protecting consumers and preventing crime while not stifling innovation.
Reddit commentator AmericanBitcoin summarised the important points of the proposed regulations:
- 45 days for existing businesses to comply with the new regulations and register with the state.
- Background check required for all employees/founders.
- Fingerprints of the above submitted to FBI.
- Requires a bond held with New York State.
- Requires written approval of all new business activities/offerings.
- Requires that you keep 10 years of records of business transactions.
- Virtual currency accounts not active for 5 years must be handed over to the state.
- Retained earnings and profits of the company can ONLY be invested in US dollars: Federal bonds, state bonds, or money market funds.
- Mandatory reviews every 2 years: financial condition, safety/soundness of business, policies…
- Quarterly financial statements required within 45 days of the closing of each quarter.
- Financial statements must be audited, use GAAP.
- Typical AML/KYC requirements.
- Cybersecurity requirement: requires security officer, security plan, audits, backup plan.
- In marketing/advertising, you must include “Licensed to engage in Virtual Currency Business Activity by the New York State Department of Financial Services.”
- Must disclose a long list of material risks with dealing with virtual currency: e.g., “not legal tender, backed by any government”
If the regulations pass as they stand, they will limit the uptake of Bitcoin by retailers in the state. However, the decentralised nature of the currency means that it does not need a centre. Claims that the proposed regulations have destroyed New York as a centre for Bitcoin/Altcoin innovation could hold water, but again, on-line innovators do not need to be based in a major financial centre.
Lawsky’s direct approach to the bitcoin community via Reddit shows he and his department are tuned into where their target group picks up on news. They must have expected an onslaught of constructive and destructive criticism from Redditors. An official 45-day consultation period for the proposed rules starts on July 23rd and commentators are asked to sent feedback to the New York Department of Financial Services via the New York State Register’swebsite.
In the mean time, Financial Crime Asia is accepting comments from readers on the expected impact of the regulations.