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New York sets rules for running Bitcoin exchange businesses

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New York has finally issued an official set of rules for businesses that deal with Bitcoins. If you recall, New York Superintendent of Financial Services Benjamin M. Lawsky and his team have been writing and rewriting those regulations for the past two years, taking criticisms into account. Lawsky has announced the final list during a recent speech at the BITS Emerging Payments Forum in Washington, weeks before he steps down from his position. These rules require businesses to apply for a "BitLicense" from the Department of Financial Services if they want to operate in the Big Apple. The final version clarifies that only companies that offer financial services, such as money exchanges, are required to take out applications, though. Software developers, individuals and retailers can accept cryptocurrency payments without having to go through the process.

The rules also state that businesses won't have to report every software update (unless it will significantly change their product/service) or to apply for BitLicense, if they already have a traditional money transmitter license. From the start, Lawsky maintained that the state wants to regulate Bitcoin-based businesses in order to avoid money laundering schemes and the like. "We simply want to make sure that we put in place guardrails that protect consumers and root out illicit activity -- without stifling beneficial innovation," he said during his speech.

While some entrepreneurs welcome the regulatory framework, as it will prove to customers that their businesses are legit, not everyone's happy with the the final list. Jerry Brito, executive director of Bitcoin advocacy group Coin Center, told The Wall Street Journal that the BitLicense program creates "an unprecedented new state-level money laundering requirement." He believes it's discriminatory, as New York banks and regular money transmitters don't have to follow a similar set of rules. His unhappiness is shared by a lot of people in the Bitcoin community, who are dismayed that Lawsky failed to address their concerns.

New York is the first state to heavily regulate Bitcoin exchanges, but other states might follow if the BitLicense turns out to be a success. If you want to know just how stringent New York's rules are, check out this full set of regulations released by Lawsky's department.

[Image credit: Getty/TimArbaev]

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