The New York Department of Financial Services (DFS) has issued guidance to all New York regulated banks that wish to engage in virtual currency-related activities.
The guidance, one of the clearest paths forward yet for banks to offer cryptocurrency services, gave a reminder of the current requirement to seek prior approval before commencing virtual currency-related activity, including where any of those activities will be conducted by a third party.
It outlined six broad categories of information that DFS will consider in assessing a covered institution’s proposal: business plan; risk management; corporate governance and oversight; consumer protection; financials; and legal and regulatory analysis.
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“Today’s guidance is critical to ensuring that consumers’ hard-earned money is protected, that New York regulated banking organizations remain resilient and competitive, and that the expectations are clear for those that wish to submit proposals for virtual currency-related activity,” DFS Superintendent Adrienne Harris said in a statement.
Institutions already engaging in virtual currency-related activities must immediately notify its point of contact at the Department, the DFS said, after which further information and clarification may be required and supervisory requirements imposed, if needed.
To develop the guidance, DFS conducted a robust analysis of the existing regulatory landscape and market trends, and engaged with consumer advocates, other state and federal regulators, industry, and academics.
Chaotic month for crypto
The guidance is final but the DFS invited stakeholders to engage and provide comments on “these important issues.”
It comes after a chaotic month for cryptocurrencies, sparked by the collapse of FTX, one of the largest crypto exchanges, which filed for bankruptcy in November,
Its founder and former chief executive Sam Bankman-Fried was charged by federal prosecutors on Tuesday with misappropriating billions of dollars and violating campaign finance laws.
Contact Jeremy at jeremy@proactiveinvestors.com