New York regulator Benjamin Lawsky interviewed about BitLicence and policing Bitcoin

This is an interview with Benjamin Lawsky who is the superintendent of financial services in New York State. Originally broadcast on Bloomberg news the following text is automatically generated and slightly edited by me, so it might not be verbatim, the interviewer is italicized.

origional URL: http://www.bloomberg.com/video/benjamin-lawsky-we-can-police-bitcoin-aZCPkB8PSdSPVzaeZFME~g.html

...(previous story about Ebola)
With an uptick in cyber crime, the government is facing a dilemma.
Tor, the onion router, allows people to go online anonymously.
It scrambles your ip address making you virtually invisible to authorities.
Once on tor, behind the curtain, on what is known as the darkweb, you can sell pretty much anything using virtual currencies like Bitcoin.
The techniques are becoming so sophisticated that the government cannot keep up.
Ben Lawsky joins me now with more.

In regular society, you can operate on a cash basis.
Shouldn't you be able to do so online?
The fear that people and law enforcement has with something like virtual currencies or the use of tor is that it's very hard to travel overseas with $5 million in cash.
It would be virtually impossible to do that.
If you do not have the right protections for the online world, you could see someone who wanted to engaged in illicit acts to this date, funding terrorism and others engaged in illicit activities.
Isn't it anonymous sending cryptocurrency and you are not being able to track it?
It's not exactly anonymous because any kind of transaction goes on the block chain -- it is basically the -- online ledger.
Its linked not to names but ip addresses -- it is linked to ip addresses.
Law enforcement can do a pretty good job but it gets harder when someone is deliberately trying to disguise their identity using other technology like tumblers.
And they're working very hard to make sure that the government cannot detect their identity.
There is an open source code known as the dark wallet.
In this project it's being designed in order to make bitcoin 100% anonymous.
There are people who definitely want to be anonymous and some people want their privacy for perfectly good reasons.
Sometimes they wanted to be anonymous for perfectly bad reasons and that's what makes it hard as regulators.
We want to allow the online world to flourish and entrepreneurs is to innovate.
There are many good things that bitcoin can bring, but at the same time you need to do this in a way to stop those who would do it in a bad way.
I don't know how you stay ahead of it.
It's an environment where people are constantly trying to innovate.
Let's talk about silk road, the ebay of drugs.
The government shut it down last year and the alleged creators are awaiting trial next month in federal prison.
Instead of the fed serving as a deterrent, we've seen a huge increase in the number of sites online from evolution, silk road 2.0. they have gotten more aggressive in terms of what they are selling. It is a lot more than illicit drugs.
Can you ever really police the dark web?
I'm not a prosecutor but I used to be one.
I think they will eventually bring the hammer down if the sites are being abused and people are dealing in illicit drugs just as if they would do if it was happening in the real world.
It's a question of how quickly they can catch up.
What regulations would you like to see put in place for bitcoin?
We would like to see consumer protections so when people entrust their money to a bitcoin wallet, exchange, or other service that we do not have a situation like Mt. Gox basically just disappearing.
There was no regulation and it basically just went away.
We want to see sufficient cyber security to prevent hacking and we want to see enough capital requirements on the entities themselves so they don't collapse under their own weight.
These are all fair points and issues and things we deal with not in the cyber world but the real world with bank accounts like JPMorgan.
Something like this takes us to the driver's seat in cybersecurity.
According to our sources, the hackers who raided the data on JPMorgan used computers linked to possible attacks of 13 more financial companies.
Again, I get back to how can you police this?
Cyber hacking and cyber security will be the most important issue we deal with this year and throughout 2014. i don't think regulators and prosecutors alone can solve it.
It has to be something we do in collaboration with the firms themselves.
We have to work together and spend a lot more money, take it a lot more seriously.
We have to be really imaginative.


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