New York State Proposes Sweeping Bitcoin Regulations

An anonymous reader writes On Thursday, Benjamin M. Lawsky, the superintendent of financial services, announced proposed regulations for virtual currency companies operating in New York. The "BitLicense" plan, which includes rules on consumer protection, the prevention of money laundering and cybersecurity, is the first proposal by a state to create guidelines specifically for virtual currency. "We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation," he said in a statement.

Comments

Translation

[Anonymous Coward]

"We have sought to strike a regulatory balance so that we can collect taxes from this growing industry without killing the golden, tax-paying goose."

Re:Translation

[nurb432]

I would agree, but they tend to kill, cook and eat the goose.

Re:Translation

[StripedCow]

"Also, we like the tracking capabilities of these virtual currencies, which is another reason for nurturing this industry."

Re:Translation

[MobSwatter]

Banks: But the banks will lose their control of money and who makes it, we will regulate this out of existence.

People: Go pass ur fiat and always suspect counterfeit paper money elsewhere, and put ur bank interchange withdrawal fees where the sun don't shine.

Re:Translation

[ArcadeMan]

Translation translation translation:

People are a problem. - Douglas Adams

Re:Translation

[DerekLyons]

Anyone with an IQ above room temperature has long known that if Bitcoin was accepted as a medium of exchange it would be treated like any other and subject to the appropriate taxes and has no problems with being so.

Re:Translation

[green1]

And the appropriate way to treat it is like cash. Can you do untraceable cash deals and avoid taxes? Yes, but it's not legal to do so. Bitcoin is the same. I believe that the law already covers this anyway, technically you must pay tax even when bartering. Will people abuse this? Of course, but no more so than they do with cash today.

The thing is, I don't see why any new law is needed. If I pay you cash to fix my sink, tax is supposed to be paid, likewise, if I trade you supper for you fixing my sink, legally tax is supposed to be paid on the value of the meal. So why do they think a new law is needed just because it's Bitcoin? Do they need to write another law for litecoin separately? How about one for the next currency that comes along tomorrow? There are already laws, use them.

Re:Translation

[Yoda222]

Anyone with an IQ above room temperature

Kelvin or Celsius ?

Re:Translation

[Dan1701]

They're doing this because legislators are effectively being paid to legislate, rather than use the existing laws to their best advantage. A previous government in Britain created one new criminal (felony) offence for every day that it was in office, with a significant proportion bordering on the silly, insane or just plain stupid. It is, for instance, now illegal to explode nuclear weapons in Britain.

I do suspect though that were anyone to actually do this, the Victorian laws forbidding the unauthorised use of explosives like dynamite would be used instead, because lawyers tend to conservatism, and stick to what they know works.

The idea that not taxing people would permit them to be more honest has never occurred to any legislator, ever.

Interstate Commerce Clause

[pubwvj]

NY State may run afoul of the Interstate Commerce Clause which bans them from interfering with the Universe outside their borders.

Re:Interstate Commerce Clause

[mysidia]

Yes..... since Bitcoin transactions involve the public ledger and miners which are all stored out of state, every time bitcoin changes hands it is simultaneously interstate commerce and foreign commerce, because the internet itself is inherently interstate.

Re:Interstate Commerce Clause

[Ralph Wiggam]

NY has a unique position among states because so many finance-related companies are headquartered there.

Re:Interstate Commerce Clause

[phantomfive]

Which is exactly why they are doing this. NY was also the state that most strongly favored carbon credits......why? Because anytime there is something to trade, NY gets a piece of it.

Does New York have the authority to do this?

[schwit1]

What could go wrong if 50 states and the feds decide on differing, possibly conflicting regulations. But maybe that's the point - regulate them into obscurity.

Re:The Death of Bitcoin?

[Eddi3]

Bitcoin is inherently the opposite of anonymous. Every single transaction is forever part of the blockchain, free for anybody and everybody to download, and even compulsory if you want to have a local wallet.

The only way to anonymize your coin is to use a service which mixes up your coins so that it's nearly impossible to trace where they went once they go into the system.

Thanks, but no thanks

[h4ck7h3p14n37]

we believe that setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.(We think the situation at Mt. Gox, for example, made that very clear.)

It seems to me the Bitcoin community has been doing just fine without regulatory "assistance". Sure some people got burned by Mt. Gox, but I'm okay with that being one of the risks if it allows me to avoid government meddling. The State is a hell of a lot more of a threat to me than some shyster like Karpeles.

Re:Already covered?

[Anonymous Coward]

Yeah its not like millions of dollars worth of bitcoins disappeared from Mt Gox without anybody being held to account ... oh wait!

That happens with US dollars too. Former NJ Governor and former US Senator John Corzine lost/misplaced hundreds of millions of dollars at the financial company that he ran. He did not go to jail. Of course it helps to be a leading Democrat and friend of the President of the United States. He was on Obama's short list for a cabinet position and Obama had publicly cited Corzine as one of his best allies in the Senate. For some reason the US Justice department didn't feel a need to send him to jail.

Virtual currencies?

[ArcadeMan]

It sounds so broad as to include my Final Fantasy XI gil, World of Warcraft gold and Star Trek Online credits.

Will they try to tax my Steam achievements too?

Re:Virtual currencies?

[GoodNewsJimDotCom]

I never really got into Bitcoin, but now I have an urge to acquire lots of Dogecoin to make taxday more fun. Such paperwork. So doge. Such write off. Much deductions.

Get a letter from the IRS: Bad Shibe, don't try and doge taxes.

Re:The Death of Bitcoin?

[Kjella]

Create a new BitCoin account, transfer some funds there and claim "I don't know whose account that is and I don't remember why I sent money there" and you've got a weak plausible deniability, I mean it's not like I have to keep track of my cash that way, just because I was given a $20 bill with serial number 1234567 from the bank it doesn't prove anything when it shows up in some drug dealer's roll of cash. Or for that matter, that a $20 bill once used to buy drugs is now in my hands. Money kept in secret must be used in secret though, if you pay with then openly it'll expose your shadow account and all the money paid from it as yours all along.

Re:Fsck NY

[rcb1974]

Totally. Mod parent up. I've lived in NY for almost 40 years and am so sick of this place. It has become a cesspool for parasite socialists.

Would probably actually use LIFO ...

[perpenso]

Apologies if I botched the math, hopefully the point gets across.

You didn't botch the math, you botched the accounting. Inventory accounting methods such as FIFO wouldn't apply.

No one said you had to use FIFO. You have to pick the coins you are using somehow, FIFO is one of various options. Personally I would probably use LIFO, spend the newer coins first, hang on to your oldest coins. That way if I hold any for over a year they can be cashed out and taxed at a lower rate, long term capital gains. Hopefully, have to check with an accountant on that.