An ad hoc group of USstate regulators - the Emerging Payments Task Force - has begun to draw up thefirst Bitcoin rule-book according to the head of the group, which aims toprotect crypto-currency users from theft and fraud while simultaneouslyproviding much needed guidance amidst the uncertainty and confusion whirlingaround the nascent industry.
Wrapped up in anenigma
To say that thesituation regarding Bitcoin in the US is perplexing would be an understatement.First, the IRS’ announced its position on virtual currencies not to regulate Bitcoin as currency but asproperty implying that Bitcoin transactions are subject to capital gains taxes.
On the flip-side, theUS Treasury Financial Crimes Enforcement Network (FinCEN) is recognizingBitcoin and other crypto-currencies as legitimate money transmitters that canbe monitored to prevent money laundering, which would make them subject tostate regulators.
Furthermore, New Yorkand California had previously considered amending laws in favor of Bitcoin as amoney transmitter and not “prohibit the issuance and use of alternative currency.”
If you didn’t get all of that then you are not alone asBitcoin-related companies across the United States have found themselves in agrey area, where they are potentially subject to state-specific regulations that could vary and may or may not even exist.
David Cotney,Massachusetts Commissioner of Banks, told Reuters at a public hearing onFriday:
"We may belooking at some type of model definitions, or model laws or regulations, andvery likely recommendations to either our federal colleagues or to Congress.”
Back in February,Cotney was appointed to head the new Emerging Payments Task Force, a group ofnine members of the Conference of State Bank Supervisors (CSBS). According to Cotney, the task force is hoping to finalize therule-book within one year.
Cotney explains thatthe goal of the task force is to clearly lay out which type of operations andtransactions must be regulated and which ones do not. "Who's in and who's out? So if we canoffer that, it would be a ... big step," he said. The group will alsostudy other new payment technologies such as NFC-based mobile phone payments.
Emerging PaymentsTask Force
The CSBS websiteexplains:
“The CSBSEmerging Payments Task Force will study changes in payment systems to determinethe potential impact on consumer protection, state law, and banks and non-bankentities chartered or licensed by the states. The Task Force will take acomprehensive approach to studying the changing payment systems, includingvirtual currencies and other innovations.”
The Task Force iscomprised of 9 state regulators:
• David J. Cotney, Commissioner ofMassachusetts Division of Banks.
• Jan Lynn Owen, Commissioner of CaliforniaDepartment of Business Oversight.
• Drew J. Breakspear, Commissioner of FloridaOffice of Financial Regulation.
• Kevin B. Hagler, Commissioner of GeorgiaDepartment of Banking and Finance.
• Benjamin Lawsky, Superintendent of New YorkState Department of Financial Services.
• Greg Gonzales, Commissioner of TennesseeDepartment of Financial Institutions.
• Charles G. Cooper, Commissioner of TexasDepartment of Banking.
• G. Edward Leary, Commissioner of UtahDepartment of Financial Institutions.
• Scott Jarvis, Director of WashingtonDepartment of Financial Institutions.
To regulate or notto regulate
State regulators havereaffirmed that they will not block digital currency operators from enteringtheir states but they want to ensure that these businesses are transparent andoperate in accordance with the law.
To add to the mix, theCommodity Futures Trading Commission is studying whether it has jurisdiction aswell after some firms have began looking into offering Bitcoin derivatives. While a member of the task force, Benjamin Lawksyfrom New York, stated back in January that his department was working on a “BitLicense” system to which California has alsodemonstrated interest.
Regardless of themyriad of possible rules that may be implemented by various agencies, clear-cutguidelines may prove to be just what the fledgling industry needs to enter themainstream by bolstering confidence of both entrepreneurs and consumers alikein Bitcoin as a legitimate method of payment.
And although we mayhave to wait a year to find out what these rules are, you can get a an idea ofwhat could be included in the rule-book, which will most likely be based on theModel StateConsumer and Investor Guidanceon Virtual Currency released by the CSBS last month, which you can view here.
For more informationabout the Task Force, go here.