A top Wall Street watchdog on Wednesday issued new rules that place stricter cybersecurity requirements on financial firms wishing to use virtual currencies.
“We think regulation is important to the long-term health of the virtual currency industry,” said Benjamin Lawsky, head of the New York Department of Financial Services (NYDFS), during remarks at a Financial Services Roundtable event. “Building trust and confidence among consumers is crucial for wider adoption. It also helps attract additional investment.”
Under the guidelines, financial firms handling bitcoins and other digital currencies will need to obtain a “BitLicense” from the NYDFS, ensure a strong cyber defense and maintain detailed records of all bitcoin transactions.
Digital currencies only exist virtually, but are increasingly accepted at major online retailers. Bitcoin’s relative anonymity has made it popular with both digital privacy advocates as well as cyber criminals.
The technology is also seen as a way to speed up financial transactions while lowering costs.
“In a world where information travels around the globe in a matter of milliseconds, it can often take several days to transfer money to a friend’s bank account,” Lawsky said. “In an age of smart phones and on-demand technology, we still have a disco-era payments system.”
But this transition must have some safeguards, the regulator added.
“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.
Lawsky’s finished product is the third iteration of the rules, but does not contain any major changes from a second draft, Lawsky said.
Tech companies like reddit and digital rights advocates have pushed back against the rules since a first draft was released last year. They argue the guidelines could inhibit some of the privacy and market benefits of cryptocurrency.