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N.Y. investigates virtual money to stem criminal use

ALBANY, N.Y. — New York is trying to corral the "Wild West" atmosphere of virtual currencies such as Bitcoin and may create new regulations to keep the growing technology from being used in crimes.

Financial Services superintendent Benjamin Lawsky's inquiry was confirmed in a memo provided Monday to the Associated Press.

"We have seen instances where the cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography," Lawsky wrote in the memo. He said virtual money could threaten national security.

The memo cites a wide range of companies and investors who received subpoenas for documents and data that Lawsky said will help better understand the burgeoning industry. Among the investors on the list are Google Ventures and another company called Winklevoss Capital Management, with "key personnel" listed as Tyler and Cameron Winklevoss — the twins who sued Mark Zuckerberg in 2004 claiming he stole the idea for Facebook from a company founded by the Winklevosses and a third person from Harvard.

Lawsky said the investigation could lead to regulations that would also benefit virtual currency, which he called an innovative product and a legitimate business enterprise.

Virtual currency is composed of digital bits and based on mathematical schemes that guard against counterfeiting. Bitcoin was started in 2009 as a currency free from government controls, an entirely digital means of exchange for a digital age. It's a rapidly growing phenomenon that has taken root as a payment method on some websites for both legal and illegal goods.

A New York official said 22 subpoenas were issued last week seeking records of antimoney-laundering measures, consumer protections, and investment and promotional materials. The official asked not to be named by the Associated Press because the inquiry hasn't been announced.

Lawsky said his department is considering whether it should issue new regulatory guidelines, rather than try to adjust current laws on legal tender to include the new technology.

Lawsky said he plans to meet with members of the virtual currency industry before new regulations are created to protect consumers and national security.

N.Y. investigates virtual money to stem criminal use 08/12/13 [Last modified: Monday, August 12, 2013 10:08pm]
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