California officials are considering whether to regulate digital currencies such as bitcoin after concluding they have the authority to do so under existing law.
Staff at California's Department of Business Oversight have determined that the state's law governing money transmitters, which until now has been used to regulate businesses such as Western Union Co., may also apply to digital currencies, in which units of money are created and exchanged independent of central banks, said Tom Dresslar, a spokesman for the department.
"The consensus among staff is that the department and commissioner could regulate virtual currency, to some extent, under current state law," Dresslar said in a telephone interview from Sacramento. "Consumers would be the prime concern of any regulatory structure we build—making sure they are fully aware of the risks associated with virtual currency and providing effective, reasonable safeguards against those risks."
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The question of how and whether to regulate bitcoin has confounded regulators around the world since it emerged in software form in 2009 from a paper authored by an anonymous computer scientist and cryptographer. Bitcoin proponents and some financial regulators say the digital currency is an important innovation that makes payments easier and cheaper.
Venture capitalists in Silicon Valley and elsewhere have invested hundreds of millions of dollars into digital-currency startup companies. At the same time, law enforcement has tackled companies and individuals over bitcoin's use in online drug bazaars and consumer frauds.
California, the world's eighth-largest economy, has a history of setting the agenda for the nation and the world on everything from banning plastic shopping bags to climate change regulations and immigrant rights. Home to Silicon Valley, California would become the largest U.S. state by population to regulate virtual currency.
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