With all of the hoopla surrounding the Bitcoin ecosystem in the past few years, there are still many "firsts" Bitcoin, or a Bitcoin startup, has yet to achieve. One of those is the establishment of a true Bitcoin bank in the United States. Due to regulations, this is no easy task. To be sure, the banking community in many ways has been receptive to Bitcoin.
Yesterday Reuters reported that Bitcoin exchange itBit has filed for a banking license in New York.
Approval for the license could take a couple of weeks, according to sources for Reuters, which could potentially make itBit the first Bitcoin company regulated as a bank within the United States.
itBit plans to enter into multiple aspects of the financial services’ business. Currently, the company operates as an exchange where buyers and sellers trade Bitcoin.
itBit has long put emphasis on Anti-Money Laundering and Know Your Customer policies. This remains the case.
"Some highly publicized failures and potentially illegal activity have focused attention on virtual currencies and have highlighted the need for a sound regulatory framework for virtual currencies," itBit Chief Executive Charles "Chad" Cascarilla stated in an October letter to New York's state banking regulator.
ItBit’s exchange operates in Singapore, but the company recently moved its main headquarters to New York, and even hired Erik Wilgenhof Plante from eBay Inc as chief compliance officer.
"Whether fairly or not, companies that work within the regulatory framework are more trusted by customers and partners," said David Berger, CEO of the Digital Currency Council, which advocates for digital currency.
itBit Trust Company LLC has enlisted former Federal Deposit Insurance Corporation Chairman Sheila Bair, former Financial Accounting Standards Board director Robert Herz and former New Jersey Sen. Bill Bradley, to maneuver the application process and beyond.
itBit enjoys venture capital funding from Canaan Partners, RRE Ventures, and Liberty City Ventures. The company has received $3.3 million in a round of fund-raising, according to CrunchBase.
Ben Lawsky, Superintendent of the New York Department of Financial Services (NYDFS), has pursued regulation of digital currencies like Bitcoin via a a so-called BitLicense. As Lawsky stated:
“In developing this regulatory framework, we have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation. These regulations include provisions to help safeguard customer assets, protect against cyber hacking, and prevent the abuse of virtual currencies for illegal activity, such as money laundering.
itBit's emphasis on AML and KYC will bode well for its application. The company has long been expanding its operations, with the main complaint against the company from customers being that its security measures are too stringent.