Virtually unnoticed for some time, Bitcoin has just become of major interest to regulators—specifically the  New York Department Of Financial Services and the US Senate. In a statement released alongside the revelation that the NYDFS had submitted 22 subpoena’s to various big players in the Bitcoin market, Benjamin Lawsky, who heads the department, called Bitcoin “a virtual Wild West.”

In an attempt to explain this action, Lawsky appeals to criminality and national security. Read the full statement here at Business Insider.

“We believe that – for a number of reasons – putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual-currency industry,” Lawsky’s memo explained. “We have seen instances where the cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography.”

The Bitcoin market has seen this before with watchdog groups and the FBI earlier noting that the currency’s psudeoanonymous capability makes it perfect for clandestine criminal operations as well as money laundering. However, it’s been noted that much of this concern doesn’t extend beyond what’s already done with US dollars or any other money. In the wake of all this, Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network (FinCEN), helped lay out some guidelines for avoiding money laundering issues for companies that work with Bitcoin; but that hasn’t really cleared up everything as regulators are still getting in gear to understand what they’re looking at.

The list of companies subpoenaed by the NYDFS are a basic whos-who of companies in the US who have had some sort of interaction with Bitcoin or virtual currencies, from Forbes:

BitInstant, BitPay, Coinabul, Coinbase Inc., CoinLab, Coinsetter, Dwolla, eCoin Cashier, Payward, Inc., TrustCash Holdings Inc., ZipZap, Butterfly Labs, Andreesen Horowitz, Bitcoin Opportunity Fund, Boost VC Bitcoin Fund, Founders Fund, Google Ventures, Lightspeed Venture Partners, Tribeca Venture Partners, Tropos Funds, Union Square Ventures, and Winklevoss Capital Management.

The addition of Butterfly Labs is particularly amusing as BFL is not involved in the exchange of Bitcoin, and is instead a well known maker of ASIC miners that are useful for auditing the currency. If anything Lawsky’s team will learn more about how mining works and how it functions.

Although Lawsky’s statement makes it sound as if regulators need to get into the business of looking at Bitcoin due to criminality—and other hot button words such as national security and child pornography—at least it will put more information in the hands of regulators about how the BTC market functions. By looping in actual financial transfer companies such as Dwolla and comparing them to Bitcoin converters such as BitInstant, BitPay, and Coinbase, it should give a broad spectrum of insights into how BTC and money interact.

Also on the regulatory front an understanding of Bitcoin and the different businesses interacting with it will help reduce misfires such as California’s warning to the Bitcoin Foundation not to engage in financial services (which they do not.)

Regulators taking note is a positive sign for Bitcoin

To begin, the fact that regulators are finally taking a strong notice of the use and trade of Bitcoin in the US economy means that the cryptocurrency has hit a critical mass where it’s a media name. It also means that exchanges, businesses, and their ilk participating in its trade need not worry about murky legality much longer as regulators come to terms with what’s happening. Attention and understanding by regulators will lead to a stabilization of the legal expectations of Bitcoin operations and give new businesses a chance to stay ahead of the curve when regulations come down.

Although this could also make it more difficult for exchanges to function in the US, at least in New York, money transmitters must submit to extra scrutiny as well as post bonds. As mentioned by the Wall Street Journal on the subject:

Although a growing number of bitcoin exchanges have registered their businesses with the U.S. Treasury Department’s Financial Crimes Enforcement Network, they have moved more slowly at the state level. In part, that is because the process of getting a license in each of the 48 states that require them is complicated and lengthy. In addition, states also typically require companies to put up a bond that could run as much as several million dollars.

This aggressive stance on Bitcoin regulation by Lawsky and the NYDFS is only the tip of a very large regulatory iceberg.

Quotes from various people in the Bitcoin community on Coindesk do a great job of highlighting how this is a real opportunity to shine.

Coinsetter’s founder Jaron Lukasiewicz said he believes the move has created the opportunity for bitcoin companies to work with regulators. “The companies you most often hear about in the bitcoin space take regulation very seriously and are working hard to do things the right way. I view this new dialogue as an opportunity to do that.”

And Patrick Murck, General Counsel at the Bitcoin Foundation, even supports a positive view of these regulatory subpoenas: “The requests are onerous and set a poor tone for New York as a home for innovation. The foundation will support its members and the bitcoin community as needed. This includes engagement with regulators and, where appropriate, legal defense.”

Regulatory missions will want to be able to hook businesses the use Bitcoin into their models, and for the most part it seems like that should be easy. After all, if BTC is exchanged for USD at any point, that exchange itself is regulated by numerous regulations; even if Bitcoin is money-or-not, having regulators make guidelines and posit rules will give the Bitcoin business market a chance to lobby the government to set those regulations and, if necessary, take it to the courts to sort them out.

In the end, having a solid set of precedent to work from will stabilize the legal understanding of BTC in the United States and this will open a path to forge head.