Monday, August 12, 2013

Two Dozen Companies Associated with Bitcoin Have Been Issued Subpoenas--Including Winklevoss Twins

The subpoenas, from the New York Department of Financial Services, seek information on a range of topics, including antimoney-laundering programs, consumer-protection measures and investment strategies, according to people familiar with the matter, reports WSJ.

This looks like the start of a serious crackdown. WSJ continues:
The department, led by Benjamin Lawsky, also plans on Monday to issue a memo expressing concern that virtual-currency companies aren't complying with the state's money-transmission laws. As a result, the state is considering setting new guidelines that are specifically aimed at virtual currencies.

"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," wrote Mr. Lawsky in a draft of the memo reviewed by The Wall Street Journal.

Companies that received subpoenas include some of the best-known names in the nascent industry, including Coinbase Inc., BitInstant and Coinsetter[...]

The state agency also sent subpoenas to companies backed by high-profile Bitcoin investors, including venture capitalist Marc Andreessen, and twins Cameron and Tyler Winklevoss[...]

"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," according to the memo.
It is not clear how well NYDFS understands Bitcoin, but the probe is not good. It suggests an attempt by NYDFS to capture Bitcoin operations so that, at a minimum, the direct purchases and sales of Bitcoin, for dollars will be regulated and tracked. A black market may develop in Bitcoin after such regulations are implemented, but unless there is wide adoption of Bitcoin by the general public before such regulations, the growth of Bitcoin will be severely slowed as a semi-anonymous currency.

Depending how harsh the regulations are, it is possible that black market Bitcoin purchases and sales may only take place in back alleys, with severe penalties for those operating in such a black market. That could result in the suffocation of the Bitcoin market.

No comments:

Post a Comment