New York’s top banking regulator sent subpoenas to 22 digital currency companies, including BitInstant and Dwolla, to determine whether new regulations should be adopted to govern the emerging industry, according to a person familiar with the matter.
Bitcoin is a virtual currency created four years ago that can be used to buy and sell a broad array of items, from electronics to illegal narcotics, according to the agency.
“If virtual currencies remain a virtual Wild West for narco-traffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise,” said Benjamin Lawsky, superintendent of the state’s Department of Financial Services, in a statement.
DFS is “considering whether it should issue new regulatory guidelines specific to virtual currencies -- rather than simply apply existing money transmission regulations,” Lawsky said.
The subpoenas, sent late last week, went to service providers as well as investors in the sector, including Winkelvoss Capital Management, said the person, who asked not to be identified because the matter isn’t public.
Coinsetter LLC, one of the companies issued a subpoena, according to the person, said the dialogue with the regulator will have a positive effect on the industry, according to Chief Executive Officer Jaron Lukasiewicz.
“U.S.-based Bitcoin companies are taking regulation very seriously, and each company is closely working with legal advisers to form and follow plans that adhere to it,” Lukasiewicz said in an e-mail.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.