ItBit becomes the first US regulated exchange, but the EU might be about to harmonize digital currency law for 500 million people.
On Thursday, May 7, Ben Lawsky tweeted out the now signed charter for ItBit, confirming its status as a registered trust business. This move allows ItBit to operate an online currency exchange between USD or other fiat currencies, and something like Bitcoin.
Big day. New York issues first charter to a virtual currency company: @itBit (a Bitcoin Exchange) pic.twitter.com/CXrYTrtpGk
— Ben Lawsky (@BenLawsky) May 7, 2015
Addressing the move in a press release on Thursday, Lawsky explained how he saw the chartering of ItBit as an important step in legitimizing and harnessing the potential of digital currencies for investors and entrepreneurs.
“We have sought to move quickly but carefully to put in place rules of the road to protect consumers and provide greater regulatory certainty for virtual currency entrepreneurs. The technology behind Bitcoin and other virtual currencies could ultimately hold real promise and it is critical that we set up appropriate rules of the road to help safeguard customer funds. Indeed, we believe that regulation will ultimately be important to the long-term health and development of the virtual currency industry.”
The problem facing ItBit, however, is that despite obtaining this license, the company still might not be able to legally operate in all 50 states. Looking into the situation, Wired asked regulators in California whether the NY approval would also work for the West Coast.
“Tom Dresslar, a spokesman for the California Department of Business Oversight, says the agency has been “looking into” whether itBit’s charter would allow it to operate within the state. “We’re not prepared to agree that ItBit is can conduct exchange transactions with Californians under its New York certificate,” he says.”
The differences in regulation between the US states have made a patchwork-quilt of how digital currencies are being looked at. While states like New Hampshire are looking at accepting BTC for tax payments, at the other extreme we reported earlier this week on comments from the national FinCEN (United States' Financial Crimes Enforcement Network ) that it was investigating a number of digital currency companies to assess whether they were complying with existing national financial regulations.
Many fear that the lack of harmony around this regulation might drive innovative fin-tech companies away from opening, or even operating, in the US. Commenting on the regulatory situation emerging in America, Coinapult co-founder Erik Voorhees spoke to the Let's Talk Bitcoins podcast on May 6:
“We didn't want to apply the tyranny of the US to the entire world of people we were trying to build services for. We didn't want to have to apply ridiculous rules that the US politicians create to the rural farmer in Africa.”
This lack of cohesive approach could also be where the European Union is about to take a strong lead over the US. In an application to the European Court of Justice, the Swedish tax authorities have asked for a Europe-wide ruling on the nature of how digital currencies should be taxed, and therefore also regulated.
Harmonizing the tax status of Bitcoin for 500 million customers could turn established tech hubs such as London, Berlin, and Tallinn, into global centers for the development of new financial technologies. The UK in particular has already taken steps along this road, having promised UK£10 million (US$15.5 million) for digital currency research in the country.
If the US reaches a point at which a fin-tech company cannot operate in every state without meeting a different set of legislative requirements in each location, the option of a harmonized European market may tempt the money, companies, and development talent across the ocean.
