Feeds

New York State to investigate 'Wild West' Bitcoin industry

Smuggling, money laundering, kiddie porn ... banking bod seeks the TRUTH

Combat fraud and increase customer satisfaction

A New York State banking regulator has issued subpoenas to more than 20 Bitcoin-related companies as part of an inquiry into the business practices of the virtual currency industry, The Wall Street Journal reports.

"If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country's national security, but also the very existence of the virtual currency industry as a legitimate business enterprise," Benjamin Lawsky, who heads the New York Department of Financial Services, said in a memo accompanying the subpoenas on Monday.

The subpoenas were sent to a cross-section of companies involved in the Bitcoin industry, sources claim, including BitInstant, Coinbase, and Coinsetter, among others.

Investors who have backed Bitcoin-related ventures were also named, including Google Ventures and Winklevoss Capital Management – the latter being the firm owned by Mark Zuckerberg's unfriended former Harvard classmates, Cameron and Tyler Winklevoss, who have taken great interest in Bitcoin of late.

An official told the Associated Press that 22 subpoenas have been issued in all, seeking information on such topics as what measures Bitcoin companies may have taken to prevent money laundering, and what kind of consumer protections might be available for Bitcoin investors.

"We believe that – for a number of reasons – putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual-currency industry," Lawsky's memo explained. "We have seen instances where the cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography."

The department's move comes not long after a federal magistrate judge in Texas ruled that Bitcoin was, indeed, a currency – paving the way for a trial to determine whether a Bitcoin trader in that state is guilty of securities fraud.

Various other state and federal agencies have recently taken an interest in the virtual currency as well, citing an apparent lack of regulatory oversight of Bitcoin transactions.

Coinsetter CEO Jaron Lukasiewicz told the WSJ on Sunday that "most companies are working to legitimize Bitcoin and want to build bridges that help regulators understand and support these financial innovations."

We shall see. How long the affected companies have to respond to the State of New York's subpoenas is not clear, and the Department of Financial Services has yet to respond to our request for comment, sent late on Monday afternoon from El Reg's San Francisco annex. ®

Top three mobile application threats

More from The Register

next story
EU: Let's cost financial traders $400m a day, because EVIL BANKERS. Right?
Wait 'til this one hits your pension fund where it hurts
Systems meltdown plunges US immigration courts into pen-and-paper stone age
Massive outage could last four weeks, sources claim
Lavabit loses contempt of court appeal over protecting Snowden, customers
Judges rule complaints about government power are too little, too late
UK.gov chucks £28m at F1 tech for buses and diggers plan
Well, not really F1 but who's heard of LMP and VLN*?
Don't let no-hire pact suit witnesses call Steve Jobs a bullyboy, plead Apple and Google
'Irrelevant' character evidence should be excluded – lawyers
Record labels sue Pandora over vintage song royalties
Companies want payout on recordings made before 1972
Edward Snowden on his Putin TV appearance: 'Why all the criticism?'
Denies Q&A cameo was meant to slam US, big-up Russia
Ex-Tony Blair adviser is new top boss at UK spy-hive GCHQ
Robert Hannigan to replace Sir Iain Lobban in the autumn
Judge halts spread of zombie Nortel patents to Texas in Google trial
Epic Rockstar patent war to be waged in California
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mainstay ROI - Does application security pay?
In this whitepaper learn how you and your enterprise might benefit from better software security.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.