State financial regulators have received few applications for licensing Bitcoin businesses even as they’ve handled many inquiries about them, according to David Cotney, the commissioner of banks in Massachusetts.
The licensing inquiries came after the Treasury Department’s Financial Crimes Enforcement Network said in March that companies that trade virtual currencies including Bitcoin are considered money transmitters for the purpose of complying with anti-money-laundering rules. Money transmitters, which include Western Union Co. (WU:US) and MoneyGram International Inc. (MGI:US), require licenses in most states.
“We are looking at one application in our state,” Cotney said at a briefing in Washington organized by the Conference of State Banking Supervisors. “Other states are looking at similar numbers.”
Shane Deal, deputy commissioner of financial institutions at the Minnesota Department of Commerce, said his agency has fielded “lots of inquiries” about virtual currencies, but that he has no sense of what kinds of companies will seek licenses.
“We know it’s coming, we just don’t know what,” Deal said.
Introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto, Bitcoin is the most prominent of a group of virtual currencies -- money that exists mainly as a string of code -- that have no central issuing authority. Even with its unclear status, Bitcoin can be used to pay for T-shirts, food or an appointment with a Manhattan psychiatrist.
Cotney said state regulators aren’t insisting that virtual currency businesses take any specific form. Some existing money transmitters are “mom and pop” businesses while others are giants like Western Union. Still others are all online and have no physical presence in his state.
“There are many models out there,” Cotney said.
New York’s superintendent of financial services, Benjamin Lawsky, said on Nov. 14 that he would hold a hearing to consider, among other issues, creating a “BitLicense” for which virtual currency companies could apply. Lawsky has also subpoenaed 22 Bitcoin-related companies for information about how the industry could monitor transactions.
The state bank supervisors group is forming a working group for 2014 on payment systems issues, said Charles Vice, the commissioner of the Kentucky Department of Financial Institutions. Vice, who is also the chairman of the banking supervisors conference, said the group will also look at developments in mobile payments, and how to reduce the cost and increase the speed of the current system.
“We’ve not had a substantial look at clearing of payments in 40 years,” Vice said.
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