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Authorities begin to crack down on Bitcoin practices

By Mason White 11:42 AM August 13, 2013
Bitcoin 

By: Sarah Weiss
Those people in love with Bitcoin should rethink their business positions after authorities said that they believe things are not right at the company.

New York banking regulators have issued subpoenas to about two dozen companies associated with bitcoin as part of a broad investigation into the business practices of the emerging virtual currency industry.

The subpoenas from the Department of Financial Services in New York, seek information on a variety of topics including anti-money laundering programs, consumer protection measures and investment strategies.

The department, headed by Benjamin Lawsky, also plans on Monday to issue a note expressing concern that virtual currency companies are not complying with the laws of the state regarding the transfer of money. As a result, the state is considering setting up new guidelines that are specific to virtual currencies.

“We believe that, for a number of reasons, the launch appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual currency industry,” Lawsky said.

The companies that received subpoenas include some of the biggest names in the industry, including Coinbase, Bitinstant and Coinsetter.

The state agency also sent subpoenas to companies backed by leading Bitcoin investors, as venture capitalist Marc Andreessen, Cameron Winklevoss, and Tyler Winklevoss, who are best known for fighting against Mark Zuckerberg over ownership of Facebook.

Bitcoins, the best known virtual coin company, are created in a computer process called “mining”. They can also be traded on several public exchanges or privately between users. Most bitcoins are traded on a Tokyo-based market called Mt. Gox, where one bitcoin Friday was valued at approximately $102.