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New York proposes regulations for bitcoin

By WTOP Staff

MICHAEL VIRTANEN
Associated Press

ALBANY, N.Y. (AP) — State regulators trying to curb money laundering and safeguard investors on Thursday proposed a special set of rules for firms involved in trading and storing virtual currencies.

New York is the first state to propose issuing separate regulations for virtual currencies, demonstrating the importance regulators attach to the fledgling field. New York City is home to several startups dealing in bitcoin, the most popular virtual currency, and some Wall Street firms are edging into the field as well.

Some industry firms vowed to comply. But the Bitcoin Foundation, a nonprofit organization that promotes the currency, questioned whether separate regulations were warranted and suggested operators should instead be integrated into existing financial regulations.

The proposal by the Department of Financial Services would establish a so-called BitLicense.

Merchants and consumers who use the virtual currency solely to buy and sell goods and services wouldn’t need the license, but those buying and selling virtual currency as a business would.

Bitcoin and other virtual currencies have been gaining the backing of legitimate investors and mainstream businesses. Earlier this year, Overstock.com became the first major retailer to accept digital money.

Users swap cash for virtual currency using online exchanges, then store it in a wallet program on their computer. The program can transfer payments directly to a merchant who accepts the currency or to private parties anywhere in the world, eliminating transaction fees and the need to provide bank or credit card information.

New York’s proposed regulations follow a yearlong department study. Financial Services Superintendent Ben Lawsky said his agency is trying to rein in money laundering and establish consumer protections without stifling innovation.

The currency exchange itBit said it intended to fully comply with regulations and said it applauded New York’s “thoughtful and transparent approach.” SecondMarket, a Wall Street firm that runs a Bitcoin Investment Trust, said the rules “will help promote further adoption of digital currencies by both consumers and investors alike.”

Jim Harper, Washington-based global policy counsel at the Bitcoin Foundation, said some provisions of the regulations would be a heavy burden on bitcoin businesses. For instance, they wouldn’t be able to keep their earnings in bitcoin, but have to convert them to regular-currency assets, like Treasury bonds or money-market funds. In addition, the requirement that they collect physical addresses of the parties in all transactions is “generally inconsistent with the way bitcoin works today.”

But most importantly, Harper said it’s unnecessary to issue licenses specific to a certain technology.

“The preference would be for there not to be a special bitcoin license but simply to integrate bitcoin into financial services,” he said.

The proposed rules are scheduled to be published July 23, followed by a 45-day comment period. The regulations would require of licensed companies:

— a background check of all employees and founders with fingerprints submitted to state authorities and the FBI;

— a bond or trust account in U.S. dollars to protect customers;

— internal controls against money laundering including customer identification;

— notifications within 24 hours of aggregate individual transactions valued at $10,000 or more;

— written approval of all new business activities or offerings;

— a security program;

— quarterly financial statements;

— the retention of 10 years of business transaction records.

The department would prohibit accounts with shell entities that have no physical presence in any country and require notifying customers that virtual currency is not legal tender and not backed by the government.

In March, the U.S. Treasury Department’s Financial Crimes Enforcement Network said its requirements for money services applied to virtual currency exchangers and administrators, requiring that exchanges register. Meanwhile, the IRS issued guidance that virtual currency is treated as property for federal tax purposes and is taxable as wages and payments to contractors.

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Online:

Proposed regulations:

http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf

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Associated Press writer Peter Svensson in New York contributed to this report.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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