itBit, the startup Bitcoin exchange whose backers include former FDIC chairman Sheila Bair, has become the first digital currency firm to receive a trust charter under New York banking law.
A subsidiary, itBit Trust Co., received the charter from New York State's Department of Financial Services, according to the company's Thursday press release. The firm, which also operates in Singapore, will begin serving retail and institutional customers in the U.S. immediately.
itBit sought approval from New York regulators in order "to serve as a custodian for our clients' assets and expand our services to U.S. customers," CEO and co-founder Charles Cascarilla said in the release. The company holds bitcoin and fiat currency in custodial accounts.
itBit also announced that it has formed a partnership with a U.S. bank that will hold its clients' dollar deposits and ensure that client accounts of up to $250,000 are insured by the Federal Deposit Insurance Corp. The company declined to disclose the name of the bank.
The news that itBit had applied for a New York charter first circulated in late April, along with reports that it had assembled an high-profile team of Wall Street and Washington backers including Bair, former New Jersey senator William Bradley and former Financial Accounting Standards Board director Robert Herz.
New York's top financial watchdog Benjamin Lawsky characterized the itBit charter as a move toward greater regulation of the virtual currency field. Before granting the charter, his department reviewed the company's anti-money laundering, consumer protection, cybersecurity and capitalization standards.
"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," Lawsky said in a separate press release. "Indeed, we believe that regulation will ultimately be important to the long-term health and development of the virtual currency industry."
itBit also announced that it has raised $25 million in funding to help launch its U.S. operations. Investors include RRE Ventures, Liberty City Ventures and Jay W. Jordan II, along with new backer Raptor Capital Management chairman James Pallotta.