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“We simply want to make sure that we put in place guardrails that protect consumers and root out illicit activity – without stifling beneficial innovation.”Under the new set of rules, businesses operating in the state of New York “engaging in virtual currency activity” and holding on to customer funds will be required to apply for a license within 45 days of the regulation’s effective date. In addition, substantial changes in a company’s business models or products, as well as the inclusion of new controlling investors will require approval of a financial regulator. However, Lawsky noted that companies will not need prior approval from regulators for standard software or app updates. Companies would also not need to request approval from NYDFS for every new round of venture capital funding, he added. “It is our hope that digital currency and other innovations in payments technology – together with prudent regulation – will help deliver better service and lower costs to customers over the long term,” concluded Lawsky. The announcement of BitLicense comes after the controversy of crypto-currency being leveraged for illegal activity, such as the trade and purchase of drugs and weapons on anonymous underground marketplaces like the infamous Silk Road. Several recent large-scale cyberattacks have also impacted digital currency exchanges, putting the funds of customers at risk. Earlier this year, Canada’s largest Bitcoin exchange Cavirtex announced the shut down of its operations following a suspected security breach.
