Insurers now offer coverage for virtual currencies, N.Y. state proposes bitcoin regulations

The New York State Dept. of Financial Services is proposing a “BitLicense” to regulate firms that accept Bitcoins and other Internet currencies to protect consumers from money laundering schemes.   Benjamin Lawsky, New York’s superintendant of financial services, says that companies that receive, transmit or store virtual currencies will have to obtain a license and hold the same amount of virtual currency that they owe customers. Companies also must issue receipts to customers who pay in bitcoins and verify customers’ identities and addresses.   This proposal is open to public comment for 45 days beginning July 23, and after which face additional review and possible changes.   In a statement, Lawsky says that it’s vital to set up the long-term future of the virtual currency industry and to protect the safety and soundness of customer assets. “We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation,” he says.   In March, the IRS said it would treat bitcoins and other virtual currencies as property and not currency, giving a boost to investors. The price of a bitcoin has increased substantially since early 2013, where it went from $13 to more than $600 today. The value of a bitcoin is faster to figure out than ever, as Google Search now supports Bitcoin in its currency calculator.    Insurance offerings and implications Insurers have been hesitant to provide coverage to businesses that operate on virtual currency. “Insurance companies do not understand [bitcoin], and even fear it,” Xapo CEO Wences Casares told CoinDesk. Earlier this year Lloyd’s was the first to offer coverage to Elliptic Vault, a bitcoin storage service, but it’s deal fell through as  CoinDesk reported. Other insurers have since joined the arena.    In June, Great American Insurance Group announced that it will offer virtual currency coverage through its Fidelity/Crime Division to both commercial and government policy holders. In a statement, Great American said that “Standard crime insurance policies, including Great American’s crime policy, currently do not automatically provide coverage for virtual peer-to-peer mediums of exchange. Crime insurance coverage for Bitcoins can now be granted by an endorsement to an existing crime policy.” Coverage is available in most states.   Bermuda-based Meridian Insurance offers virtual currency coverage to Xapo, an online bitcoin vault based in California. Senior Vice President of business development Ted Rogers told CoinDesk that the company’s policy is “much larger than $15 million” and part of the reserve is held in bitcoins.