New York’s Department of Financial Services has announced that they will be releasing a regulatory framework in regards to virtual currency exchanges and firms.

The NYDFS aims to release this framework for “BitLicenses” within the end of the second quarter of 2014.

It started an inquiry on virtual currency usage on August 12, 2013. The inquiry focused on cryptocurrencies, but was mostly relegated to Bitcoin and its protocol. The department conducted extensive research in this regard.

Many industry issues were addressed, including investor activities, law enforcement issues, consumer protection problems, limitations and the potentials of the technology and last, but not least, safety concerns.

The department further expanded the research spectrum on January 28 of this year, and public hearings were conducted. The purpose was exploratory and to gather expert opinions and testimonies. The testimony led to some very eminent conclusions.

The key issue was the need for a regulated virtual currency exchange in United States. It was the prevailing vulnerability in the virtual currency market that had led to this conclusion along with cases of potential fraud and money laundering, such as the Mt. Gox fiasco, which saw customers of the exchange lose hundreds of thousands of bitcoins worth north of $116 million dollars.

The conclusion of the testimony also emphasized the need of a proper framework and having operational and legal controls. BSA/AML requirements were also identified as the need of the hour.

The department is requesting to review all company proposals and applications that identify the need for establishing virtual currency exchanges in the state of New York.