New York to regulate Bitcoins following hearing where Winklevoss twins testified about the risks of digital currency - just days after their business partner was arrested on money laundering charges

New York to regulate Bitcoins following hearing where Winklevoss twins testified about the risks of digital currency - just days after their business partner was arrested on money laundering charges

• New York could become the first state to regulate digital currency
  
• The Winklevoss twins' business partner in the Bitcoing business was arrested over the weekend on money laundering charges
  
• Authorities say Charlie Shrem conspired to launder money by helping to funnel cash to illicit online drugs bazaar
  

ByDaily Mail Reporterand Reuters
PUBLISHED: 00:41 EST, 29 January 2014 | UPDATED: 06:29 EST, 29 January 2014

New York's top bank regulator on Tuesday revealed new plans to regulate businesses handling transactions in bitcoin this year, saying the state may issue new financial services licenses tailored to virtual currencies.

Benjamin Lawsky, New York's financial services superintendent, raised his idea for a "BitLicense" in a hearing a day after a prominent bitcoin entrepreneur was arrested on money laundering charges.

'The first job is to get rid of money laundering,' said Lawsky, speaking to panelists at the hearing whose panelists included the investor twins Cameron and Tyler Winklevoss and the venture capitalist Fred Wilson.



Winklevi: The Winklevoss brothers testified during the hearing about regulating Bitcoins just days after their business partner was arrested




Virtual currency: New York will be one of the first state's in the country to regulate the use of virtual currency, widely known as Bitcoins

The Winkelvoss' testimony comes just days after their business partner in the digital currency business, Charlie Shrem - the vice chairman of the Bitcoin Foundation, which has the financial backing of the famous twins - was arrested on charges that he conspired to launder money by helping to funnel cash to illicit online drugs bazaar Silk Road.
The 24-year-old entrepreneur, who lives above a bar he jointly owns in Manhattan that accepts bitcoins as payment, was CEO of BitInstant, a bitcoin exchange company that closed last summer.

According to prosecutors, Shrem conspired with a Florida resident, Robert Faiella, who ran an illegal exchange, to sell more than $1million in bitcoins to users of Silk Road, which was shuttered by authorities last year.



Regulations: Benjamin Lawsky announced potential plans to offer licenses for businesses that deal in Bitcoins



Busted: 24-year-old Charlie Shrem was arrested over the weekend on money laundering charges

Faiella, 52, is also charged in the complaint filed in U.S. District Court in Manhattan with conspiring to commit money laundering and operating an unlicensed money transmitting business. He was arrested at his home in Coral Gables, Florida.

Officials from New York's Department of Financial Services asked panelists how they could best imagine businesses handling bitcoins meeting regulatory requirements equivalent to those directing other financial firms to combat money laundering and keep track of customer activity.

While bitcoin experts testifying in the hearings said they agreed with the need for regulation, they warned an overly arduous system could stifle innovation and push startup companies and bitcoin transaction activity offshore.

The dialogue exposed a core conflict in the relationship between regulators and bitcoin enthusiasts. When it was first created in 2009, the digital currency, which is not controlled by any company or central bank, appealed mostly to a group of tech specialists, many of whom harbored strong mistrust in governments and were looking to escape government control.



Experts: Regulators brought together experts in the Bitcoin industry to participate in a hearing to determine how to govern digital currency



Fame: The Winklevoss brothers are best known for suing Facebook founder Mark Zuckerberg, claiming he stole the idea for Facebook from them

The investors at Tuesday's hearing acknowledged activity in the bitcoin community has shifted away from this sentiment and said they wanted regulators to step in with rules for bitcoin businesses to follow. But, they said, too much regulation would damage bitcoin's growth.

'I sympathize with Jamie Dimon,' Wilson said at one emotional moment during the hearing, which he later described as a 'rant.'

'He runs an overregulated business,' Wilson said of Dimon, chief executive of JPMorgan Chase & Co, which paid nearly $20 billion over the past year to resolve various regulatory and legal problems.

'I'm not sure I share all the sympathy,' Lawsky said, adding he believed that the terrorist attacks of September 11, 2001 would have been more difficult to carry out if better anti-money laundering laws for financial firms had been in place.

An effort similar to New York's to regulate virtual currencies is underway in California, according to a source familiar with a series of private meetings between bitcoin business leaders and state officials.


Read more: http://www.dailymail.co.uk/news/article-2547880/Winklevoss-twins-testify-hearing-aimed-regulating-Bitcoin-industry-just-days-partner-virtual-currency-business-arrested-money-laundering-charges.html#ixzz2roGPaANs