Bitcoin exchange is now a New York bank

The U.S. now has its first bitcoin exchange that will be regulated as a bank.

New York’s top financial regulator on Thursday granted a charter to bitcoin exchange itBit, which gives people a platform to buy and sell bitcoins.

{mosads}It’s the first virtual currency company to receive a charter from the New York Department of Financial Services, a significant win for bitcoin entrepreneurs looking to bring legitimacy to the digital currency.

The charter will allow the company to expand its financial service operations.

“We have sought to move quickly but carefully to put in place rules of the road to protect consumers and provide greater regulatory certainty for virtual currency entrepreneurs,” said department head Benjamin Lawsky.

Digital money, known as cryptocurrency, is not tied to any government monetary system, but can be exchanged for government-backed money or used to make purchases at a growing number of online retailers.

Advocates argue there are myriad economic and privacy benefits in having an alternative to the standard monetary system.

Detractors note the untraceability of cryptocurrencies enable cyber crooks to conduct business anonymously. Several top bitcoin exchanges have also fallen victim to mammoth cyber thefts, resulting in the reported loss of millions of dollars worth of bitcoins.

Lawsky has led the charge among regulators to install enhanced oversight and disclosure requirements for companies using digital money, irritating some cryptocurrency proponents.

The Wall Street watchdog believes in the benefits of virtual currency but thinks it needs oversight to thrive.

“The technology behind bitcoin and other virtual currencies could ultimately hold real promise, and it is critical that we set up appropriate rules of the road to help safeguard customer funds,” he said Thursday. “Indeed, we believe that regulation will ultimately be important to the long-term health and development of the virtual currency industry.”