A Boston financial services startup, Circle Internet Financial, received the nation’s first license Tuesday to allow the exchange of digital currency like Bitcoin through its applications.
The “BitLicense” from the New York Department of Financial Services became available in June, when the state introduced digital currency regulations that relate to consumer protection, anti-money laundering compliance, and cyber security guidelines.
“Putting in place rules of the road that help protect consumers from loss or theft and root out illicit activity is vital to building trust in this new financial technology,” said Anthony J. Albanese, acting superintendent of financial services at NYDFS, in Tuesday’s announcement.
This is a notable milestone in the legitimization of “cryptocurrency,” which is an online, global currency, not backed by any banks. The currency is digitally encrypted to make it somewhat anonymous, fast, and to allow it to be exchanged mostly without fees. Cryptocurrency exchanges, which are run by the people who use them, have operated mostly in the margins of the law.
Circle, which allows people to use its apps to exchange traditional money and bitcoins, in May landed a $50 million investment from Goldman Sachs and IDG Capital Partners, a Chinese firm, among other investors. It had already raised $26 million in 2013 and 2014.
The Los Angeles Times has reported that Goldman Sachs in a recent report said that cryptocurrencies are part of the technological revolution upending the $1.7-trillion global payments industry. Bitcoins can be exchanged into traditional money. The report also said that 80 percent of all bitcoin volume is exchanged into and out of Chinese yuan.
“This is something tech folks in Silicon Valley have realized is really disruptive and can change a lot of industries, and Wall Street is finally waking up to that reality,” Jerry Brito, director of an independent nonprofit research center called Coin Center, and an adjunct law professor at George Mason University in Virginia told the LA Times.
The Goldman Sachs report estimates that more than 100,000 merchants worldwide, like Overstock, Microsoft, and Expedia, accept bitcoins as payment.
Since the BitLicense was introduced in New York State, 25 firms have paid the $5,000 non-refundable application fee to receive it.