Assemblymember Ron Kim (D-Whitestone, Flushing and Murray Hill) intends to introduce legislation to better regulate digital currency in New York State after releasing a white paper detailing some components of the plan.
The four-page document, released on December 13, views such currencies as “a historical opportunity for New York.” Yet there are risks involved that require new rules to protect consumer information and investments.
“Virtual and cryptocurrencies are a new and exciting development for many consumers, but they still entail a great deal of risk,” Kim said. “With the value of Bitcoin and other virtual currencies on the rise, the potential for massive financial losses are mounting.”
Cryptocurrencies are virtual currencies that have grown in popularity—and value—since the late 2000s. These currencies operate without a centralized authority changing its value. Users use it to purchase items or services anonymous as well as exchanging for real currencies. Companies oversee these exchanges on their own services.
Bitcoin is the most famous and the first example of a cryptocurrency with one Bitcoin currently totaling over $16,500. First created in 2009 by an anonymous user named Satoshi Nakamoto, it became popular among internet users and experienced unstable exchange rates.
While legal in most countries, some nations have blocked any transactions involving cryptocurrencies. The Chinese government forbids financial institutions from handling Bitcoin. Others are considering treating the virtual currencies as taxable. The Internal Revenue Service requires Bitcoin owners to report their earnings as capital gains.
In 2015, New York State’s Department of Financial Services (NYDFS) created “BitLicense,” guideliens that require companies managing digital currencies to obtain a license and follow regulations. This led to many firms leaving the state because of costs, sometimes exceeding tens of thousands of dollars, when following rules.
Kim suggests improving cryptocurrency regulation by offering a New York State Seal of Approval for licensed companies handling Bitcoin as well as decentralizing their servers to protect consumer information.
“By replacing current NYDFS rules with a new licensing program that fairly protects consumers and attracts high-quality exchanges, we can demonstrate that New York is still the leader of the financial world in the digital era,” he said.
Kim’s office told Queens County Politics that the bill is still being worked on before it is officially introduced. When it is complete, Kim will send it to his colleagues in the state Assembly and seek support for his measure.
“New York is already the financial capital of the world, but if we can’t keep up with future technological developments we’ll be left in the dust,” Kim said.