Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
New York has its new BitLicense and California is actively looking at regulations for virtual currencies, but the organization that promotes uniform state laws is working on a prospective law that would guide regulations for alternative and mobile payments.
The Chicago-based Uniform Law Commission (ULC) created its Alternative and Mobile Payment Systems drafting committee just this past spring and could have a formal proposal out for comment by next July, according to Sarah Jane Hughes, a university scholar and fellow in commercial law at Indiana University. Hughes, who is acting as reporter for the committee, was a member of a panel on payments regulation and legal trends Thursday at the Federal Reserve Bank of Chicago’s 2015 Payments Symposium.
Founded in 1892, the ULC’s members must be attorneys and include legislators, judges, legislative staff, academics, and practicing lawyers. It aims to create uniform state laws throughout the country in areas where uniformity provides social and commercial benefits. Common rules would indeed benefit mobile payments and virtual currencies, which currently have very few regulations and can cross state and international boundaries with merely a keystroke on a computer or a tap on a mobile device.
Having a workable draft law up for discussion in barely more than a year represents fast work for the ULC, according to Hughes. The draft, however, is likely to be revised as it goes through the vetting process. “People’s ideas about what is the right mix of things may be somewhat different,” Hughes said.
Still, the fact that the ULC is working quickly shows that the rapid growth of mobile payments as well as of Bitcoin and other virtual currencies has caught the attention of legislators and and regulators around the country.
New York State recently granted its first so-called BitLicense to Boston-based Bitcoin startup Circle Internet Financial. The path-breaking BitLicense set of regulations was the brainchild of Benjamin Lawsky, former superintendent of financial services for the state and now a consultant. Lawsky, who also was on Thursday’s panel, said “two very different worlds are colliding,” those being the untamed world of computer and mobile technology and the much older, highly regulated world of financial services.
“I don’t pretend to have the right answer,” he said of trying to strike the right balance between regulation that protects consumers and the financial system while at the same time promoting innovation. But he likened the job to that of the best NBA referees, who “are never noticed” but enable players to display their skills while effectively enforcing game rules.
The federal government also is keeping an eye on new payment forms. The Consumer Financial Protection Bureau in its pending rules for prepaid cards signaled interest in virtual currencies. “It is unclear at the moment as to what they will indeed do,” said Hughes.
Another panel member, Valerie Abend, senior critical infrastructure officer at the Office of the Comptroller of the Currency, noted that federal banking regulators in June introduced their Cybersecurity Assessment Tool to help financial institutions determine their vulnerability to online attacks and data breaches. She said the cyber-attackers’ latest strategies include digital extortion and the planting of malware that just doesn’t steal data, but destroys computer systems.
