Bitcoin Forum

The Wall Street Journal
TECHNOLOGY
Updated August 11, 2013, 10:11 p.m. ET

Regulator Examines Bitcoin Practices
New York Issues Subpoenas to Firms Tied to Bitcoin.
By ROBIN SIDEL

New York's top banking regulator has issued subpoenas to roughly two dozen companies associated with bitcoin as part of a wide-ranging inquiry into the business practices of the fledgling virtual-currency industry, according to people familiar with the matter.

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 the people..

Subpoenas were sent to firms backed by high-profile Bitcoin investors such as Cameron and Tyler Winklevoss.

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.

Executives from Coinbase and BitInstant couldn't be reached for comment on Sunday. Jaron Lukasiewicz, chief executive of Coinsetter, said in an email that the information request is "an opportunity for companies in our space to open up a much needed dialogue with regulators."

He added, "They'll quickly find that most companies are working to legitimize Bitcoin and want to build bridges that help regulators understand and support these financial innovations."

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, who are best known for battling Mark Zuckerberg over ownership of Facebook Inc. FB -0.10% Mr. Andreessen and the Winklevoss brothers couldn't be reached for comment on Sunday.

Bitcoin, the best-known of a crop of virtual currencies, are created in a computer process called "mining." They also can be traded on a number of exchanges or swapped privately among users. Most bitcoin are traded on a Tokyo-based exchange called Mt. Gox, where one bitcoin was valued Friday at roughly $102.

A subpoena is a legal demand for information and doesn't signal wrongdoing by the recipient. The New York banking department sent the subpoenas late last week, according to the people familiar with the matter.

The subpoenas come amid heightened scrutiny from state and federal regulators into the world of virtual currencies. Because virtual currencies aren't backed by a central government like traditional ones are, regulators are worried they can be used for illegal activity or can violate laws involving money transmission.

Federal regulators earlier this year issued guidelines placing virtual-currency exchanges under the same comprehensive antimoney-laundering requirements as traditional money-transmission businesses such as Western Union Co.

Although a growing number of bitcoin exchanges have registered their businesses with the U.S. Treasury Department's Financial Crimes Enforcement Network, they have moved more slowly at the state level. In part, that is because the process of getting a license in each of the 48 states that require them is complicated and lengthy. In addition, states also typically require companies to put up a bond that could run as much as several million dollars.

New York has been one of a handful of states aggressively examining the industry. Mr. Lawsky has assembled a team to assess the issue and already sent a warning letter to BitInstant, a New York company that allows customers to buy and sell bitcoins.

"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.

The round of subpoenas also are aimed at gleaning information about how the companies are dealing with individual investors who may be attracted to the novelty of virtual currencies, but may not be sophisticated enough to understand the risk associated with them.

Write to  Robin Sidel at robin.sidel@wsj.com

http://online.wsj.com/article/SB10001424127887323585604579006880143449754.html?mod=googlenews_wsj

Robin Sidel, still employed and apparently unbattered from the Avalon/Joe Lewis/Phoenix fiasco, is writing about subpoenas sent to 11 bitcoin-focused businesses.

Seems regulators want information about virtual currency usage (in their quest to save idiot bitcoin users from their idiocy).  Perhaps the meetings will go well.

FYI, the Joe Lews reporter was Harriet Agnew.

If you were are one of the subpoena recipients mentioned here and are marveling at the multitude of demands and short deadline and are contemplating not responding:  That would probably be a very bad idea. You should seek legal council immediately. relocate your self and your business outside the US and never look back.

 Lawsky is the supervisor of all Insurance companies in New York, all New York State-chartered depository institutions and the majority of United States-based branches and agencies of foreign banking institutions. He also regulates all of New York State’s mortgage brokers, mortgage bankers, check cashers, money transmitters, budget planners, and similar providers of financial services.

Lawsky led Governor Andrew Cuomo’s initiative to make the Department of Financial Services, which includes the former New York State Banking and Insurance Departments, into a modern unified financial regulator.

 Lawsky’s objectives for the new Department of Financial Services include three main goals—keeping New York on the cutting edge as the financial capital of the world, protecting consumers better than ever before, and serving as a model of efficient government.

Lawsky was Governor Andrew Cuomo's Chief of Staff. Previously, he served as the Deputy Counselor and Special Assistant to then-Attorney General Cuomo. Prior to that, Mr. Lawsky had spent over five years as an Assistant United States Attorney in the Southern District of New York, where he prosecuted white collar crime, organized crime, and terrorism cases.

and once again America trying to control the world.... im getting to the stage where im going to start encouraging people to attack America....

i now full blown hate America.. if you come to the UK or Europe and your American your probably better of lieing and saying you Canadian. less chance youll get beaten up.

You're getting to the stage where you need to settle down.

What country are you in?  If you're in the UK or elsewhere Europe, don't think for a second the relevant authorities aren't looking closely at bitcoin. Oh, and they record all internet and other telecoms data too. ;D

I'm sure it would have easier to stop the Nazi's earlier than later .... as long as you keep re-drawing the line they'll keep stepping over it.

atleast they put the effort in to try and control the world... America arnt even doing that there just taking over the world by sending papers to other governments and other governments s**ting themselves and doing what ever there told

Joint efforts deserve joint recognition:
http://www.teribuhl.com/2013/08/06/the-mess-the-wsj-made-famed-trader-joe-lewis-not-investing-in-bitcoins/

and once again America trying to control the world.... im getting to the stage where im going to start encouraging people to attack America....

i now full blown hate America.. if you come to the UK or Europe and your American your probably better of lieing and saying you Canadian. less chance youll get beaten up.

im not raciest or sexist i just hate anything to do with America and anything to do with Americas "way of life" if America was a person it would be locked away in a small cell with restraints on.

if America was a person in my country and i had control it would have been shot several time over

You need to check yourself, mister. There is a HUGE difference in the american people and our evil overlords that are doing all the things you hate.

The last few years have woken up the vast majority of americans to knowing that they're not in control anymore... Things like PRISM, FISA courts and drone warfare in countries we're not even at war with are kinda hard to ignore. The problem is that the media still tells everyone that people with those feelings are in the minority... But we aren't. The last presidential election proved that when Ron Paul gathered larger crowds at his speeches than any other candidate, including obomba... yet the press just kept saying he had no chance and people believed that.

I'll grant you that the american 'way of life' is the major problem though... It allowed for our tyrants to rise and control so much. -But we're paying for it now and this country is going to crash and burn horribly because of it. -So don't be so eager to kick us while we're down... We've still got a long way further to fall.

Well that removes the possibility of your country being the UK. ;)

Wow, this guy sounds like a real shining white knight ... I wonder where he was when AIG (insurance) was running it's goldman sachs multi-billion dollar pass through scam ... and MBIA (insurance) was blowing up the CDO market to tune of $50+ BILLION??

These SEC guys can't get off their porn sites to catch the real criminals ... but wait someone wants to compete with the federal reserve e-debt notes .... " ... we right on it massa ..."

Wow, this guy sounds like a real shining white knight ... I wonder where he was when AIG (insurance) was running it's goldman sachs multi-billion dollar pass through scam ... and MBIA (insurance) was blowing up the CDO market to tune of $50+ BILLION??

These SEC guys can't get off their porn sites to catch the real criminals ... but wait someone wants to compete with the federal reserve e-debt notes .... " ... we right on it massa ..."

im going to kick. poke. and prod at America all the way.... you got your selves into a right mess and the least i can do is laugh at you all while you suffer "im not very sympathetic to anyone these days" the fault is while you crash and burn you wont do it dignified youll take down other country's with you to...

with a bit of luck theres still a chance at recovery.