On the heels of a Securities and Exchange Commission enforcement action against an alleged bitcoin-based Ponzi scheme,  New York's top banking regulator has subpoenaed more than 20 virtual currency enterprises, demanding information about their business practices that may be used to develop new regulations.

The subpoenas were authorized by Benjamin Lawsky, superintendent of financial services for New York state's Department of Financial Services. In a memo issued on Monday morning, he detailed his concerns and “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.”

“If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country's national security, but also the very existence of the virtual currency industry as a legitimate business enterprise,” he wrote, urging enhanced transparency and consumer safeguards.

DFS has launched an inquiry into the appropriate regulatory guidelines that it should put in place for virtual currencies, Lawsky wrote. There is concern that virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS. Under current DFS regulations, firms engaging in money transmission are required to post collateral in order to better safeguard customer account funds. They are also required to undergo periodic safety and soundness examinations and comply with applicable anti-money laundering laws.

DFS is considering whether it should issue new regulatory guidelines specific to virtual currencies, rather than simply apply existing money transmission regulations. New guidelines would be “tailored to the unique characteristics of virtual currencies,” Lawsky wrote.

The state's efforts would supplement the growing scrutiny of virtual currency businesses by its federal counterparts. In March, the Treasury Department's Financial Crimes Enforcement Network, which focuses on money laundering and other monetary crimes, issued new guidance for distributing and using virtual currency. It targets “convertible virtual currencies” that either have an equivalent value in real currency or act as a substitute for it.

FinCEN's interpretive guidance seeks to clarify the applicability of Bank Secrecy Act regulations to virtual currencies, defining certain businesses and individuals as money services businesses (MSBs) depending on the nature of their financial activities. MSBs have registration requirements and a range of anti-money laundering, recordkeeping, and reporting responsibilities under FinCEN's regulations.

Those who use virtual currencies exclusively for common, personal transactions, like receiving payments for services or buying goods online, are not affected. However, intermediaries in the transfer of virtual currencies from one person to another person, or to another location, are designated as “money transmitters” that must register as MSBs. The distinction of being a money transmitter triggers additional state registration and regulatory requirements.

In June, a report by the Government Accountability Office suggested that the Internal Revenue Service consider collecting taxes on virtual currencies when they are used as a payment for real world goods and services.