US: cryptocurrencies to be framed in a regulatory act by State Bank supervisors

Friday 19 December 2014 00:46 CET | News

The Conference of State Bank Supervisors (CSBS) has released a draft proposal for regulating digital currency businesses, reports.

The membership group, which represents bank regulators from US state agencies but does not play a direct role in how states craft new financial rules, outlined a number of areas in which it believes companies that work with digital currencies should be supervised, including approaches to consumer protection, licensing and security.

Overall, the framework echoes elements of the New York State Department of Financial Services (NYDFS) BitLicense proposal. The draft framework targets those who exchange digital currencies or facilitate such activities, and explicitly identifies itself as “technology neutral”.

The CSBS suggests licensing and supervision requirements should apply to businesses that exchange virtual currency for fiat currency and virtual currency for other types of virtual currency, transmit virtual currencies and facilitate the third-party exchange, storage or transmission of virtual currencies. The latter category is defined to include wallets, vaults, kiosks, merchant-acquirers and payment processors.

The framework also suggests that, as far as financial services are concerned, there are regulations in most state laws which, generally, cover the transmitting, exchanging, and/or holding of value on behalf of another. Such financial transactions or services deem the supplier as a trustful party which forms the basis for most financial services laws and regulations, irrespective of the medium of value.

In addition, the CSBS announced that a period of public comment on the guidance has begun that will last until 15 February 2015. The draft framework includes eight areas in which the CSBS is pushing for digital currency regulation, which covers record keeping, cybersecurity protocols and transaction data standards.

Like the NYDFS, the CSBS wants digital currency businesses to gather information on those involved in transactions that they are party to, such as names and IP addresses. The framework calls for those firms to adhere to existing AML/KYC regulations and institute consumer protection measures including disclosure agreements, insurance mandates and secure data storage mechanisms.

The CSBS is also advocating for rules that will allow state regulators to share information and coordinate on investigations that involve digital currency businesses. The document released by the CSBS proposes guidance for how states might look at regulating digital currency regulations.

The CSBS concluded in its policy statement that consistency in regulatory language can help those who oversee the emerging digital currency industry regulate activities appropriately, and pledged its support for “consistent and uniform regulation”.

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Keywords: US, cryptocurrency, digital currency, State Bank, supervisors, framework, business
Categories: DeFi & Crypto & Web3
Countries: World
This article is part of category

DeFi & Crypto & Web3