One step forward, one step back last week for Bitcoin.
In New York, the nation’s first cyber security regulations, designed to protect consumers and financial institutions, have been proposed by Governor Andrew Cuomo and the state Department of Financial Services. The regulations would directly affect BitLicense-approved and Bitcoin companies plus other New York financial license holders. NYDFS Superintendent Maria Vullo said, “Consumers must be confident that their sensitive non-public information is being protected and handled appropriately by the financial institutions that they are doing business with.”
According to the new guidelines, companies must:
• Establish a cybersecurity program
• Adopt a written cybersecurity policy
• Designate a chief information security officer responsible for implementing, overseeing and enforcing its new program and policy
• and have policies and procedures designed to ensure the security of information systems and non-public information accessible to, or held by, third-parties, along with a variety of other requirements to protect the confidentiality, integrity and availability of information systems.
Bitcoin company officials said if the proposed regulations are implemented, they will have to pay hundreds of thousands of dollars in fees to comply with all of the guidelines. Bitcoin companies, including exchanges and wallet service providers, already must obtain a costly BitLicense required by the NYDFS.
Bitcoin officials also said the new cyber security regulation will make their platform, software, system and applications more vulnerable since they will have to store more sensitive user data in their private servers and databases.
Also in New York, U.S. District Judge Alison Nathan in Manhattan has ruled that the virtual currency Bitcoin qualifies as money in a decision linked to a criminal case over hacking attacks against J.P. Morgan Chase and other companies.
Nathan rejected a bid by Anthony Murgio to dismiss two charges related to his alleged operation of Coin.mx, which prosecutors have called an unlicensed bitcoin exchange.
According to Fortune Magazine, Murgio had argued that Bitcoin did not qualify as “funds” under the federal law prohibiting the operation of unlicensed money transmitting businesses. The judge, however, said the virtual currency met that definition.
“Bitcoins are funds within the plain meaning of that term,” Nathan wrote. “Bitcoins can be accepted as a payment for goods and services or bought directly from an exchange with a bank account. They therefore function as pecuniary resources and are used as a medium of exchange and a means of payment”
The decision did not address six other criminal counts that Murgio faces, Nathan wrote.
Prosecutors last year charged Murgio over the operation of Coin.mx, and in April charged his father, Michael, with participating in bribery aimed at supporting it. Authorities have said Coin.mx was owned by Gery Shalon, an Israeli man who, along with two others, was charged with running a sprawling computer hacking and fraud scheme targeting a dozen companies, including J.P. Morgan JPM 0.56 percent, and exposing personal data of more than 100 million people, Fortune reported.
