North Carolina Considers Regulating Bitcoin

Following New York’s new bitcoin charter North Carolina is developing regulations for digital currencies.

Photo: FL Smith/Flickr

Photo: FL Smith/Flickr

North Carolina laid down to control digital currencies transactions. Regulations are being developed to make the sphere more reliable. In the beginning of May draft law passed the state House and now is directed to the Senate.

Companies dealing with digital currencies must offer customers a well-developed system of work. There are standards of consumer protection, anti-money laundering and some other that must be compulsory for everyone.

Although virtual currencies, bitcoin in particular, have some obvious advantages known for financial geeks, many customers are still far from clear-eyed understanding of the details. The whole process seems to be quite simple – people sell and purchase in the Internet and store electronic cash in wallets. It allows making transactions all over the world with minimal fees and not providing secure bank information.

But it would be incorrect to say that using digital currencies doesn’t imply any risk, which in fact caused the necessity of regulation. The Consumer Financial Protection Bureau announced that electronic money is not as safe as physical one stored on bank deposits, it’s not supported by the government, has volatile exchange rates and is prone to hacker attacks.

Ray Grace, North Carolina Banking Commissioner, reflected this contradictory nature of digital currencies saying: “There are two sides to the Bitcoin. One side is the clear potential value of the innovation, and what that could portent for the payment system. Since we’re a business friendly state, we want to facilitate that. But regulation was needed to keep bad actors out. We wanted to mitigate the risk while facilitating the potential benefits down the road.”

Nowadays there are many digital currencies created on the basis of bitcoin protocol – Litecoin, Auroracoin, Peercoin. Such companies as, Dish Network and Expedia have contributed greatly to popularization of bitcoin and other currencies. Several US states are planning to start accepting taxes in bitcoin although final approval of this law hasn’t been received yet.

The first regulations were developed by the U.S. Treasury Department’s Financial Crimes Enforcement Network in 2013. New York followed and issued the first charter for businesses dealing with virtual currencies. It serves to protect bitcoin entrepreneurs.

According to new regulations digital financial companies in North Carolina must:

  • post a surety bond intended to protect customers of at least $150,000 growing to a maximum of $250,000 based on trading volume.
  • have a net worth of at least $250,000, which the banking commissioner could increase if deemed necessary.
  • conform to a clear set of prohibited practices such as never failing to send money as directed.
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