Winklevoss twins’ bitcoin site gets banking charter

New York’s top banking regulator on Monday granted a banking charter to bitcoin exchange Gemini, launched in January as a “hack-free” site.

Tyler and Cameron Winklevoss, best known for their drawn-out lawsuit against Facebook founder Mark Zuckerberg, are behind the exchange, which gives people a platform to buy and sell the digital currency bitcoin.

{mosads}It’s the second virtual currency firm to receive a banking charter from the New York State Department of Financial Services (NYDFS). The watchdog approved a charter for ItBit in May, making it the first U.S. bitcoin exchange to be regulated as a bank.

“We are continuing to move forward on licensing and chartering virtual currency firms,” said Anthony Albanese, acting superintendent of the NYDFS. “Smart, targeted regulation that helps protect consumers and prevent illicit activity is vital to the long-term future of this industry.”

At Gemini’s launch, the Winklevoss twins said they intended to bring security and legitimacy to the virtual currency payment process, which has been rattled by a number of hacks and alleged fraud at major exchanges.

“Our goal was simple: bring together the nation’s top security experts, technologists, and financial engineers to build a world-class exchange from the ground up with a security-first mentality,” Cameron Winklevoss said in a blog post.

Financial regulators have not stood idly by. The NYDFS has moved to increase reporting requirements around the use of digital currency, which can be swapped for physical money or used to make purchases directly at an increasing number of retailers.

The regulator in June issued its final BitLicense framework. Under the guidelines, financial firms handling bitcoins and other digital currencies will need to obtain a BitLicense from the NYDFS, ensure a strong cyber defense and maintain detailed records of all digital transactions.

The banking overseer issued its first BitLicense in September to virtual currency firm Circle Internet Financial. It has received 25 applications in total.

Tech companies such as Reddit and digital advocates have worried the new regulations might stymie innovation and damage digital privacy. Digital currencies are favored by privacy advocates because they are largely anonymous.

Gemini will be expected to comply with the BitLicense standards under its banking charter.