The Bitcoin Exchange, “itBit,” based in New York City, has received a licence from Ben Lawsky, New York's Superintendent of Financial Services.

Lawsky, whose over-zealous regulation of virtual currency drove most of that business away from his city to the Isle of Man last year, has announced that his New York State Department of Financial Services has granted a charter under the New York Banking Law to itBit Trust Company LLC, a commercial Bitcoin exchange. The firm is now qualified to take on customers from all 50 states in the Union.

Real ultimate promise

Lawsky claims to have "moved quickly but carefully" in his attempts to find a way to regulate virtual currencies in the interests of the city's banks. He concedes that the technology behind Bitcoin and other virtual currencies "could ultimately hold real promise." This is evident from the fact that IBM is thinking of taking on the underlying technology behind Bitcoin, known as the 'blockchain,' to create a digital cash and payment system for major currencies, after talks with the US Federal Reserve, the shadowy cartel of privately-owned banking interests that issues the currency of the United States, and other central banks.

The NYDFS expects to publish its final set of regulations on the subject later this month. Meanwhile, the US Financial Crimes Enforcement Network has fined San Francisco's Ripple Labs $700,000 for contravening the Bank Secrecy Act 1970. This is the first civil enforcement action against a virtual currency exchange. FinCEN persuaded the firm that a court might find it guilty of acting as a money services business and selling its virtual currency, known as XRP, without registering.

A new reserve currency?

The fact that the powers that be are looking into the possibility of issuing their own virtual currency is revealing. Some believe that they are bowing to an idea that has found its time.

As one commentator put it: "Reserve currency is commonly held by nation-states and institutions for foreign exchange reserves and large cross-border transactions. Reserve currencies, like gold, can also be used for the ultimate backing of a government’s own monetary regimes as in the currency substitution cases of Panama, Barbados, Bermuda, and Uruguay.

"Bitcoin as a reserve currency asset has appeal because it is non-governmental and global in nature. Its sustainability will not be affected by regional political instability and it has the potential to outlast certain countries and their forms of government. Bitcoin is governed by the laws of mathematics."