Benjamin M. Lawsky, superintendent of financial services, today announced that the New York State Department of Financial Services has issued for public comment a proposed "BitLicense" regulatory framework for New York virtual currency businesses, according to a press release. The proposed regulatory framework — which is the product of a nearly year-long DFS inquiry, including public hearings that the department held in January 2014 — contains consumer protection, anti-money laundering compliance and cyber security rules tailored for virtual currency firms.

"We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity — without stifling beneficial innovation," Lawsky said in a statement. "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."

In accordance with the New York State Administrative Procedures Act, the proposed DFS rules for virtual currency firms will be published in the New York State Register's July 23, 2014, edition, which begins a 45-day public comment period, according to the announcement. After that public comment period, the rules are subject to additional review and revision based on that public feedback before DFS finalizes them.

Additionally, DFS is today immediately publishing a copy of the regulations on the website Reddit. Earlier this year, Lawsky hosted an "Ask Me Anything" forum on Reddit about DFS's work on virtual currency regulation, which generated more than 1,200 public comments, according to the press release. Links to the proposed rules are also being tweeted out from the DFS Twitter handle (@NYDFS) and Superintendent Lawsky’s Twitter handle (@BenLawsky).

"We recognize that — as the first state to put forward specially tailored rules for virtual currency firms — continued public feedback will be an important part of finalizing this regulatory framework," Lawsky said. "We look forward to carefully and thoughtfully reviewing public comments on our proposal."

The new DFS BitLicenses will be required for firms engaged in the following virtual currency businesses:

• Receiving or transmitting virtual currency on behalf of consumers;
• Securing, storing or maintaining custody or control of such virtual currency on the behalf of customers;
• Performing retail conversion services, including the conversion or exchange of fiat currency or other value into virtual currency, the conversion or exchange of virtual currency into fiat currency or other value, or the conversion or exchange of one form of virtual currency into another form of virtual currency;
• Buying and selling virtual currency as a customer business (as distinct from personal use); or
• Controlling, administering or issuing a virtual currency. (Note: This does not refer to virtual currency miners.)

The license is not required for merchants or consumers that utilize virtual currency solely for the purchase or sale of goods or services, or those firms chartered under the New York Banking Law to conduct exchange services and are approved by DFS to engage in virtual currency business activity, according to the statement.