State regulators warn virtual currency exchanges: WSJ

(Reuters) - State regulators are warning virtual currency exchanges and other companies that deal with Bitcoin that they could be shut down if their activities run counter to money transmission laws, the Wall Street Journal reported, citing people familiar with the matter.

Banking regulators in California, New York and Virginia in recent weeks have issued letters saying the companies need to follow the state rules or prove that the rules do not apply to them, the Journal said.

"Virtual currency firms inhabit an evolving and sometimes murky corner of the financial world," Benjamin Lawsky, superintendent of New York's Department of Financial Services, told the WSJ in an interview.

"The extent and nature of their operations morph constantly, so it's important for regulators to ask the hard questions and stay ahead of the curve in order to root out dangerous or illegal activity," Lawsky said.

Spokespeople for California banking department and Virginia Bureau of Financial Institutions declined to comment to the Journal. (http://link.reuters.com/wuq29t)

Most money transmission rules require companies to provide detailed financial data, business strategy and information about the management. States also usually require companies to put up a bond of several million dollars.

Digital currency is electronic money that can be passed between individuals without the use of the traditional banking or money transfer system.

Bitcoin, which has been embraced by a number of venture capitalists in Silicon Valley, exists through an open-source software program that any users with enough skill and computing power can access. It is not managed by a single company or government. Users can buy bitcoins through exchanges that convert real money into the virtual currency.

None of the parties could immediately be reached for comment by Reuters outside of regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Richard Borsuk)

Source: http://news.yahoo.com/state-regulators-warn-virtual-currency-exchanges-wsj-042043274.html

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