NYDFS To Extend Comment Period - Essay Example

New York’s Department of Financial Services said on Thursday that it would extend by 45 days the comment period for its proposed virtual currency regulations. Those interested in submitting comments on the new rules will now have until Oct. 21.

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The move comes after a number of prominent Bitcoin supporters requested additional time to comment on the draft rules, which is intended for virtual currency companies operating in New York and includes rules on consumer protection, the prevention of money laundering and cybersecurity.

A “BitLicense” would be required for Bitcoin exchanges and for companies that secure, store or maintain custody or control of virtual currency on behalf of their customers.

“It’s obvious that this is a novel regulation,” Benjamin M. Lawsky, the superintendent of financial services, said in an interview on Thursday. “It’s really the collision of banking regulations with new technology, and we want to make sure we get it right.”

Should Mr. Lawsky’s office make significant changes to the proposal after the comment period, they will go out for further review.

Since the proposed regulations were introduced in July, Bitcoin supporters have had a mixed reaction on whether the rules will help legitimize digital money or stanch innovation and threaten the freedom Bitcoin was intended to foster.

Many in the Bitcoin industry expressed concern that the original 45 days allotted for comments would not allow for enough time to fully digest the proposals.

Start-ups in particular said they simply did not have enough resources to comply with regulations that seem to favor more established financial institutions.

Interview With Benjamin Lawsky – CNBC 17 July 2014

Mr. Lawsky said his office had received thousands of comments on the issue. Soon after the draft rules were made public, a group of about 400 virtual currency supporters sent a letter to Mr. Lawsky asking for a 45-day extension of the comment period.

The Bitcoin Foundation sent a similar letter in the first week of August requesting up to six more months to provide feedback.

Supporters have also asked that the comment process be more iterative and that Mr. Lawsky hold a public hearing to discuss the proposals.

On Wednesday, the three biggest Bitcoin exchanges in China, BTC China, OKCoin, and Huobi, sent comments to Mr. Lawsky addressing the proposed rules.

Among other issues, the exchanges said that the BitLicense framework should only cover virtual currency companies with “meaningful” connections to New York.

“As written, the proposed regulation is overly broad in its application outside the United States, imposes a disproportionate compliance burden on virtual currency businesses and misapplies normal compliance procedures,” they said in a release.