Topic: [2014-07-17] Bitcoin regulation in state of New York is announced. - page 3. (Read 5691 times)

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It would appear that creating a new cryptocurrency could be interpreted as licensed activity in NY.  Now one might argue it is unenforceable, but unenforceable really means selectively enforceable.  That is always a bad thing and should be discouraged.  The law could go unenforced for years or decades and then used to attack some altcoin developer who resides in NY because he made the wrong people angry.  Legal landmines like that should not be included in any regulation.

That isn't exactly true.  At the federal level FinCEN has provided guidance that the exchange of virtual currency constitutes money transmission under federal law and thus entities must register as a MSB with FinCEN.  FinCEN's "guidance" is actually very poor and contradicts existing guidance (exchanging USD for EUR is not money transmission).   It would have been preferable for FinCEN to do as NY has done and create a new regulated class (or expand "currency exchanger" to cover virtual currencies).  They didn't and what is done is done.  Still FinCEN's guidance doesn't apply to state regulations.  They opened the box and created a huge amount of uncertainty.

No two states even share the same definition of "money transmission" or "money" at the state level and thus the applicability of existing money transmitter regulations on entities that exchange virtual currency for real currency is a huge legal gray area.  Only a few states have provided any public information on the applicability of existing regulations.  In some states existing regs could apply although that probably won't be certain until after some court decisions.  In other states due to the wording it is highly unlikely that the existing regulations could cover virtual currency exchangers without a modification of the statute.  This is going to take years if not decades to play out.

Proposed Regulations (TL;DR):

    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"

The #2 above is particularly distressing.  I can't understand how they would enforce that or why they would want to.  For a company like ours, holding a reserve of virtual currency becomes a requirement.  So from an accounting point of view it does absolutely nothing.  Ok we retain earnings as USD and then we buy BTC to increase our virtual currency operating reserve.  The requirement is just regulation for regulation sake.