The California state government is debating whether to regulate Bitcoin—and other digital currencies—after legally concluding that they have the authority to do so, BusinessWeek is reporting.

The issue is whether an existing state law that governs money transmitters—such as Western Union—would now apple to digital currencies.

"The consensus among staff is that the department and commissioner could regulate virtual currency, to some extent, under current state law," Tom Dresslar, a spokesperson for the California Business Oversight Department, told BusinessWeek. "Consumers would be the prime concern of any regulatory structure we build -- making sure they are fully aware of the risks associated with virtual currency and providing effective, reasonable safeguards against those risks."

The story also quoted Patrick Murck, executive director of the Bitcoin Foundation, an advocacy group for the currency, applauded the move. "It will be good to see California move forward in a responsible way, applying their existing regulations and providing some clarity and certainty for digital currency businesses," Murck said.

New regulations in California could impose various requirements before virtual currency companies could obtain a California business license. "Applicants would have to show they have sufficient capital to operate and a qualified management team, which would have to undergo criminal background checks. They’d also have to be bonded at levels consistent with size and maintain reserves, called 'eligible securities,' equal to the amount of their outstanding money transmissions," the story said.