The impact of New York’s regulations for virtual currencies won’t stop at the state line. Regulators across the country puzzled over how to handle Bitcoin and its ilk will likely view the state’s rules as a template, and so the proposal released on Thursday (PDF) might end up shaping the national landscape.
As written, New York’s rules would legitimize Bitcoin while taking another step toward its rational endpoint: a dull and possibly practical financial instrument devoid of counterculture cred. Licenses—adorably named BitLicenses by the state—would be required to be held by companies that provide financial services; businesses that just accept payments in virtual currencies won’t need a license. Bitcoin transactions of more than $10,000 must be reported to state officials, and businesses would need to keep detailed records of every transaction involving the virtual currency, including the names and physical addresses of all parties involved, the amount of value changing hands, and “a description of the transaction.”
Anonymity was one of the initial appeals of Bitcoin, but you hear less and less about this virtue the more it shifts from being a libertarian craze to a financial craze. In this sense, Bitcoin is following the traditional path of the aging radical. As a youngster it set out to smash the system, keep the government out of its business, get a little high, and so on. But over time it starts thinking more practically, decides there are advantages to being co-opted by Wall Street after all, and develops a taste for really expensive shoes.
That doesn’t mean there’s not a Che Guevara poster hanging in the basement. Benjamin Lawsky, New York’s superintendent of financial services, says he wants to set up “common sense rules of the road.” But he isn’t forgetting Bitcoin’s roots. In addition to the standard press release, he took to Reddit to explain himself. The response was a mixture of angry suspicion and appreciation that Lawsky was so thoughtful to visit the website.
Bitcoin’s libertarian days are a fading memory, and anonymity was always the leading candidate as the principle most likely to be sacrificed. Is adhering to such regulations selling out? Maybe it’s better to think of it as buying in.