From: The National Law Review
Carmelo Gordian Meghan E. Griffiths
Bitcoin has been growing in popularity, and major retailers like Dell, Overstock.com, eBay and PayPal have taken notice with announcements that they are, will or are considering accepting digital virtual currency. State regulators have also taken notice as they grapple with consumer protection concerns in an evolving and enigmatic virtual financial industry that, until recently, has been largely unregulated.
State regulators are developing approaches to regulating virtual currencies and companies that operate in the industry in response to concerns that Bitcoin and other virtual currencies are not backed by a central bank, volatile in value and vulnerable to cyber-attack. On July 17, 2014, the State of New York was one of the first out of the gate when the New York State Department of Financial Services (DFS or agency) issued proposed regulations for businesses that engage in “Virtual Currency Business Activity.”
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Cyber-Security Program
Each licensee would be required to establish and maintain a cyber-security program to ensure availability and functionality of the licensee’s electronic systems and to protect those systems from unauthorized use. The licensee’s cyber-security policy would be subject to review and approval, audit and periodic review by the agency.
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