New York State’s top financial regulator has granted the
first license to a Bitcoin exchange, allowing it to open legally to customers
across the country. The exchange, itBit, said Thursday morning that it was
beginning to take on customers in the United States immediately after receiving
a banking trust charter from New York State’s Department of Financial Services
and its superintendent, Benjamin M. Lawsky, who has been trying for some time
to bring new rules to the fledgling virtual currency industry. In addition to
the new license, itBit, which has offices in New York and Singapore, also
announced on Thursday that it had won $25 million in new financing and had
appointed three prominent board members: Sheila C. Bair, the former
chairwoman of the Federal Deposit Insurance Corporation; Bill Bradley, the
former New Jersey senator; and Robert H. Herz, a Morgan Stanley director.
The trust company charter gives itBit a banklike status and
appears to make it the winner in a race among Bitcoin exchanges to become the
first to be fully regulated in the United States. In the past, several
unregulated Bitcoin exchanges have collapsed under questionable circumstances,
tarnishing the public reputation of the virtual currency and losing coins worth
hundreds of millions of dollars.
Earlier this week, an enforcement arm of the Treasury
Department fined a virtual currency company, Ripple Labs, $700,000 and said it
“willfully violated” the bank secrecy act and failed to report suspicious
activity. Mr. Lawsky has been working for more than a year to establish a
regulatory procedure to deal with the unusual nature of virtual currencies and
the unique security risks that they present. He has proposed a so-called
BitLicense and has said he hopes to complete it later this month.
ItBit avoided the need for a BitLicense by instead applying
for a trust company charter, which appears to come with even stricter
regulations. It is the first trust company to be created in New York since the
financial crisis. Many Bitcoin companies have been held back by the difficulty
of opening accounts with banks, which have been hesitant to deal with the risks
of virtual currencies. As a trust company, itBit will be able to be the
custodian of customer funds by itself.
The process of obtaining the charter has been arduous and
expensive and occupied itBit for more than a year. It has already been
operating for foreign customers from Singapore. Because of the extensive requirements
for opening an account with the company, itBit is planning to focus primarily
on larger investors and financial institutions.
Although the price of Bitcoin has stagnated over the last
year, interest in its technology has been growing among large financial and
technological companies. Last week, Goldman became the first bank to make a
significant investment in a Bitcoin company when it helped lead a $50 million
funding round for the Bitcoin payment company Circle.
Many banks are most interested in the financial network,
called the blockchain, that allows the Bitcoin digital tokens to be transferred
quickly and cheaply. The focus at itBit
will be on allowing customers to buy, sell and hold the digital tokens as an
asset, like a sort of digital gold. Many early Bitcoin users, who were drawn to
the virtual currency because of its independence from government, have opposed
efforts to win regulatory approval for the technology. But itBit and other
companies have said that approach is unlikely to work in bringing virtual
currencies into the mainstream.
Click here to access the full
article on The New York Times.