By | on May 27, 2015 at 10:29 AM, updated TRENTON — There's an effort in the New Jersey Legislature to put the state at the forefront of a growing new electronic industry: digital currency.Two north Jersey lawmakers recently proposed a 30-page bill (A4478) that would create a regulatory framework for the companies that deal in digital currency and offer tax breaks to companies that service or exchange it."I want to encourage innovation here in New Jersey.I think there's an opportunity for job creation," said Assemblyman Mukherji (D-Hudson), who introduced the measure along with Assemblyman Gordon Johnson (D-Bergen).The industry is based on Bitcoin, an online currency that was introduced in 2009.It's a complicated concept and one that industry advocates spent two hours explaining to legislators during an Assembly Financial Institutions and Insurance committee hearing in February."Bitcoin today looks very much the internet did in 1995," Jerry Brito, an advocate for "cryptocurrency" technology like Bitcoin, said at an Assembly Financial Institutions and Insurance Committee hearing in February.

"Then some dismissed the internet as curiosity, but because it was an open platform, you could build on top of it.You maybe couldn't imagine what you could build on top of it.We couldn't imagine Skype or Netflix or Facebook.But we could see the pieces were there to build something."Unlike traditional online payment systems like Paypal, a bitcoin payment is like a cash transaction between two people.There is no third party enabling and keeping tabs on transactions as there is in a service like PayPal, and there is no central bank involved.Instead, a ledger called a "blockchain" records every transaction and is publicly distributed."You can make online payments between two persons without the use of an intermediary.And that is completely new," said Brito.It also allows for anonymous transactions, making the currency popular with hackers and civil libertarians.Internet users called "miners" verify and process the transactions, for which they're compensated with newly-created bitcoins.Companies that work with digital currency tend to oppose stricter regulation like the plan put forward in New York.

But some are pushing for the type of regulation contained in the New Jersey legislation, dubbed the "Digital Currency Jobs Creation Act," which is more friendly to the industry.The bill would prohibit municipalities from putting their own regulations or taxes on digital currency.new jersey bitcoin regulationCompanies who deal in the industry would have to register with the state Department of Banking of Insurance, including a business plan, registration fee to be set by the commissioner, and fingerprints and photographs of "key members" of the organization, among other things.litecoin euro rateThe companies would be required to establish and maintain "an effective cyber security program" and designate an employee as a chief information security officer to oversee it.bitcoin billionaire pc online

And they'd be required to keep records of their activity for at least five years.The legislation also has incentives aimed at drawing the companies into New Jersey.Companies that create at least 10 jobs would get favorable treatment under the state's tax credit program, qualifying for up to $5,000 for each new job they create in addition to the base tax credit they qualify for.And the companies — which often use energy-consuming computer equipment — would be exempt from paying taxes on money they spent on electricity."You need a lot of firepower by way of technology to be in this business," Mukhjerji said."It would try to ease some of that burden."At least one New Jersey state department, the treasury, has officially recognized bitcoin, issuing an April 2 memo that explained how sales tax should be applied to its transactions.The memo angered \bitcoin advocates because it treats the transactions like barter and "double taxes" the currency.Bitcoin has had its problems.In 2013, enthusiasm for the currency drove its value extremely high, reaching $1,150 per bitcoin.

It crashed, and each bitcoin's value now is about $238.Brito called that a "correction" based in part on early overenthusiasm fort he currency.And the first major bitcoin exchange, a Japanese website called Mt.Gox, collapse in 2014 as hundreds of thousands of bitcoins went missing, likely stolen."They were not prepared for this to become a billion dollar industry, essentially, overnight," Brito said."And when they got there they found themselves totally unprepared.The website they built was not really up-to-snuff.We don't know exactly what happened, if they were hacked or if it was an inside job.There's an ongoing investigation."Mukherji said he wasn't sure if his bill, which has not yet been introduced in the state Senate, would advance.But he said some sort of regulation will be needed."The legislation clarifies where digital currency stands sort of in the rubric of New Jersey law.In other states that's been confusing," he said."I think this would be the first statute of its kind in the country.

We would be establishing the framework legislatively."Follow him on Twitter @MattFriedmanSL. Photos of the Week: May.A group of nine business owners and legal experts pitched a panel of New Jersey legislators this week on why they should make the Garden State a hub for bitcoin development.To get there, the panel urged, would require creating an environment in which digital currency developers, startups and ideas could flourish without the risk of onerous financial rules stifling innovation.The 5th February hearing was hosted by the New Jersey Legislature's Assembly Financial Institutions and Insurance Committee.Among the topics discussed were the multi-signature wallet technology, the nature of transaction verification and coin creation, and the general state of bitcoin regulation in the US today.Echoing a number of US regulators, legislators asked about Mt Gox and how the failed bitcoin exchange’s mistakes can be prevented in the future; and the BitLicense proposal, of which the New York Department of Financial Services’ released a revised draft version this week, was invoked as a cautionary tale for how to not regulate cryptocurrency.

Also mentioned were the potential rewards for New Jersey should the state roll out the proverbial welcome mat for digital currency, including job growth, tax revenue and the chance to play home to an experimental yet fast-growing economy.New York-based attorney and Blockchain global policy counsel Marco Santori pointed to the growth of capital investment in digital currency companies during the hearing, telling legislators: “That is a lot of money that could be spent creating New Jersey jobs, leasing New Jersey office space, leasing New Jersey apartments, buying meals from New Jersey restaurants and paying New Jersey taxes, and employing New Jersey residents.” “But right now, all that money is being spent in California and New York,” Santori added.Those present at the hearing pushed lawmakers to bring regulatory clarity to the US digital currency ecosystem, at the risk of pushing that development – and the possible rewards thereof – out of the country.Speakers at the event included New York Law School professor and Coin Center fellow Houman Shadab, CoinComply managing director Brian Stoeckert, Ziftr CEO Robert Wilkins and Coinware general counsel Quentin Page.

Coin Center director Jerry Brito offered his organization’s assistance to the panel in the future, and called for clarity on how either new laws or existing statutes will apply to businesses in the space, saying: “This technology, again – we don’t know where it’s going.But there are many positive uses, and we want to make sure those can meet their potential.” Brito fielded a number of technical questions from legislators, and notably defended the industry during discussions of Mt Gox by saying that developers and stakeholders are working to prevent a similar collapse – and the ensuing fallout – from taking place again.Santori suggested that legislators could create financial incentives, including tax breaks and business grants, to entice developers and investors to New Jersey.He cautioned against using a framework like the BitLicense, urging lawmakers to create a flexible environment that welcomes digital currency businesses instead of turning them away.“Digital currency entrepreneurs are building this economy, and I ask that you give them good reason to build it here in New Jersey,” he said.

Legislators asked the panel about the risks for consumers and businesses when using bitcoin and how regulation has developed in the United States thus far.ItBit CEO Charles Cascarilla told the committee that businesses that use digital currency should be judged on a case-by-case basis owing to fact that, with bitcoin, there are both financial and non-financial uses of the technology.“It comes down to: how are you using bitcoin?” Cascarilla explained.“If you’re moving a practically worthless amount of bitcoin, you probably shouldn’t have any real regulation.” TeraExchange co-founder and president Leonard Nuara, joined by CEO Christian Martin, told the committee that their New Jersey-based company has long operated under the jurisdiction of US regulators.They suggested that federally-regulated exchanges that handle bitcoin can offer tools to help people hedge against price volatility, a topic discussed numerous times during the hearing.One legislator asked about the maximum coin supply and how the price and bitcoin-denominated financial instruments might be impacted when all of the coins are in circulation.