The fact that these discussions are even happening, speaks volumes regarding how seriously this is being taken...
http://dealbook.nytimes.com/2014/01/28/in-praise-of-bitcoin-with-little-regard-for-banks/?_php=true&_type=blogs&_r=0and from the Wall Street Journal:
By ROBIN SIDEL CONNECT
Updated Jan. 28, 2014 7:28 p.m. ET
Bitcoin backers defended the fledgling digital currency at a hearing in New York on Tuesday, one day after prosecutors announced money-laundering charges against prominent bitcoin businessman Charlie Shrem.
In the first of two days of hearings held by New York's top banking supervisor on the topic, prominent bitcoin entrepreneurs such as Cameron and Tyler Winklevoss acknowledged potential benefits of setting certain rules on the industry but warned that too much regulation could stall innovation and send jobs overseas.
The Winklevoss twins, best known for taking on Mark Zuckerberg over the founding of Facebook Inc., FB +2.97% are involved in a number of bitcoin investments and have proposed establishing an exchange-traded fund that is dedicated to bitcoin.
Regulation "will play the biggest role in bitcoin's forthcoming evolution," Cameron Winklevoss told a panel from the New York Department of Financial Services. He warned that "overregulation could cripple its development."
The hearings came as Mr. Shrem stepped down from his post as vice chairman of the board of the Bitcoin Foundation, the group said Tuesday. An early bitcoin advocate, Mr. Shrem was arrested and charged in connection with a money-laundering conspiracy. The Manhattan U.S. attorney's office said Monday that Mr. Shrem allegedly funneled more than $1 million of bitcoin to users of the online black-market site Silk Road.
Keith Miller, Mr. Shrem's lawyer, didn't respond to requests for comment. He said in court Monday that his client is "presumed innocent."
Responding to a question from Benjamin Lawsky, the superintendent of the New York financial-services department, who presided over the hearing, Tyler Winklevoss described the arrest of Mr. Shrem as a "speed bump" for the fledgling industry. The twins' investment vehicle, Winklevoss Capital Management, was an investor in Mr. Shrem's bitcoin exchange.
Created in 2009, bitcoin is a virtual currency that has attracted attention from investors, entrepreneurs and merchants. Unlike currencies such as the dollar and euro, it isn't backed by a central government.
Bitcoin was trading at about $845 Tuesday on the CoinDesk index of three bitcoin exchanges, up more than 40 times over the past year.
The currency has provoked intensifying debate in recent weeks. Hedge-fund manager Paul Singer wrote in a letter to investors this week that he was "shocked" by bitcoin's popularity and is skeptical of its long-term prospects.
"There is no more reason to believe that bitcoin will stand the test of time than that governments will protect the value of government-created money, although bitcoin is newer and we always look at babies with hope," wrote Mr. Singer, founder of the $23.3 billion Elliott Management Corp., in the letter.
An Elliott spokesman declined to comment beyond the letter.
New York's Mr. Lawsky has been among the most aggressive regulators to tackle the industry. He sent subpoenas to roughly 20 companies last year as part of a broad probe and said Tuesday that his office is likely to propose a "regulatory framework" for virtual currencies this year.
"Clearly, when it comes to virtual currencies, regulators are in new and uncharted waters," Mr. Lawsky said in opening remarks of the hearing.
The New York regulator has said that he may consider creating a "bitlicense" to handle issues that arise with bitcoin firms.
Mr. Lawsky acknowledged that the current banking system is sometimes inefficient, referring to the multiple days it takes for his credit-card bill payment to clear his bank, even though they both are part of the same institution. He didn't identify the bank.
Cameron Winklevoss also took issue with comments made last week by J.P. Morgan Chase & Co. Chief Executive James Dimon about bitcoin, specifically the point that the CEO made in a CNBC interview that "it's almost impossible" to know your client and conduct anti-money-laundering reviews when bitcoin is being used. "They will eventually be made as a payment system...to follow the same standards as all these other payment systems. That will probably be the end of them," Mr. Dimon said.
Mr. Winklevoss said Mr. Dimon has a "fundamental misunderstanding" of bitcoin. A J.P. Morgan spokesman declined to comment.
The hearing is set to continue Wednesday with representatives of law enforcement and other bitcoin executives.
Some bitcoin backers urged Mr. Lawsky to create structures that will allow bitcoin companies to more easily communicate with regulators. Fred Wilson, a partner at Union Square Ventures, which is pursuing bitcoin investments, suggested that Mr. Lawsky institute a "safe harbor" in which start-up bitcoin companies could alert the department about their operations even if they don't yet comply with all the money-transmission rules.
"Entrepreneurs are afraid to tell the [N.Y. Department of Financial Services] that they are operating for fear of being shut down," Mr. Wilson said.
But Mr. Lawsky said such companies would still need to show they are following anti-money-laundering rules, because, "if there's a choice between preventing money laundering and innovation, we're always going to choose squelching money-laundering first."
—Ryan Tracy and Rob Copeland contributed to this article.rom the Wall Street Journal
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