New York State Department of Financial Services proposed rule on Virtual Currency.

[H Morrow Long <morrow.long () YALE EDU>]

New York State's Dept of Fin Svcs recently proposed a regulatory rule on
Virtual Currency businesses.  Yesterday (8/6/14) the Bitcoin Foundation
asked for an extension of the comment period (
http://dealbook.nytimes.com/2014/08/06/bitcoin-foundation-seeks-more-time-to-address-virtual-currency-rules/?_php=true&_type=blogs&_r=0
).

Yes, it's starting to happen -- state governments are taking note of the
Bitcoin economy (and ecosystem) as well as some of the financial dangers
(see: Mt Gox) and the potential loss of fees and taxes due to a
subterranean economy based on untraced digital coinage.

NY is often a pioneer and sets precedents in financial industry regulation
(and enforcement) -- because of Wall Street and other NYC based financial
services companies.

An examination of the proposed rule shows NY is definitely looking at
having businesses which deal in crypto currencies (such as Bitcoin) to have
them track transactions as well as secure both transactions and customer's
financial holdings and information.

Such tracking and security as written would also appear to attempt to
defeat some of the somewhat (note not 100% at any rate anyway) anonymous
nature of Bitcoin since the rule states that customers cannot hide or
obfuscate their identity in order to evade the laws on limits on currency
trades and reporting, etc.

Many of the proposed measures under the rule would require that "exchanges"
implement information security programs similar to those for the highest
tier credit-card handling enterprises under PCI/DSS.

Is it left less well-defined as to what regulations would fall upon
organizations accepting Bitcoin (e.g. would campus organizations, centers
and Labs which now state that they "Accept Bitcoin" be required to protect
these transactions and virtual currency under PCI/DSS-like requirements?).

http://www.workplaceprivacyreport.com/2014/08/articles/data-security/ny-department-of-financial-services-proposes-virtual-currency-rule/?utm_source=Jackson+Lewis+P.C.+-+Workplace+Privacy+Report&utm_campaign=41c71050b8-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_4a1c27c942-41c71050b8-70242157
http://www.workplaceprivacyreport.com/wp-content/uploads/sites/162/2014/08/pr1407171-vc.pdf