The New York Department of Financial Services has revealed a proposal of regulations governing virtual currencies such as Bitcoin.

The rules say that anyone conducting “virtual currency business activity” needs to have a BitLicense. That sort of activity includes things like buying and selling virtual currency as a customer business, storing virtual currency on behalf of others, or issuing a virtual currency. Merchants and customers who use virtual currencies exclusively for the transactions of goods and services, however, are exempt.

If you want to start a virtual currency exchange or operate an online wallet service in the state of New York, you’re going to need a BitLicense, but if you just want to buy or sell a pizza with virtual money, it’s still possible to do so without first getting government approval.

Applying for a BitLicense involves disclosing personal and financial information for top company officials, undergoing a background check, paying a fee, and providing details about the structure and business goals of the company. If the regulators see any shady behavior, licenses can be either suspended or revoked entirely following a hearing.

The proposal also introduces capital requirements, which are rules that nearly all financial institutions are required to follow requiring them to have a certain amount of cash (or other assets) on hand to ensure that a market downturn or bad business decision doesn’t suddenly sink the whole company and its customers’ investments with it. The minimum amount of capital each virtual currency financial firm will be required to carry will be determined by regulators on a case-by-case basis.

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