State regulators among those keeping eye on Bitcoins
From left, Bitcom founders Matt Whitlock of Weare, and Josh Harvey and Zach Harvey, of Manchester, are seen in February in Washington, D.C., with a early version of their Bitcoin machine. (COURTESY)
Bitcoin is a virtual currency, existing as computer bits and bytes, stored on computer disks. Bitcoins cannot be held, are not backed by gold, silver or the credit of a sovereign nation and are created as a reward for developing the solution to advanced math problems.
“We have not really seen this emerge in New Hampshire and have received no complaints,” said Barry Glennon of the state Securities Bureau. “To those who are promoting the Bitcoins and the trading of Bitcoins, it is not money and therefore it does not meet the investment contract analysis.”
The magistrate hearing a case involving the transactions of the virtual currency says Bitcoins are securities since they are an “investment of money, in a common enterprise, with the expectation that profits will be derived from the efforts of the promoter or a third party.”
“Central to the point is ’are you making profit based on the efforts of others — that’s where you get to the investment contract analysis,” Glennon said. “If it is deemed a security, it would trigger regulation.”
“It might run into money transmitter regulations,” said Glenn Perlow, state bank commissioner.
Federal currency regulation designed to prevent money-laundering require the reporting of large cash deposits at financial institutions.
Zach Harvey, CEO of Manchester-based Lamassu, which has developed a Bitcoin machine that accepts currency in exchange for Bitcoins deposited into “virtual” wallets on mobile devices, said the company has yet to be contacted by regulators.
“The Internet, one-hundred dollar bills and even books could be used to promote malignant activity,” he said. “Bitcoin has the potential to replace or enhance an aging financial system, and great care should be taken before taking steps that can drive this innovation outside the U.S.”
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