New York DFS Issues Guidance for Banks on Cryptocurrency Engagement
The New York state Department of Financial Services (DFS) released guidance on December 15 for regulated banks seeking to engage in activities involving virtual currency. This guidance, effective immediately, outlines the application process and summarizes the types of information considered relevant for obtaining approval from the agency.
The 11-page document is primarily structured in bullet points, detailing the informational requirements for several categories, such as “Business Plan” and “Consumer Protection.” It also includes a series of formal checklists to aid institutions in meeting the requirements.
According to the guidance, approval must be sought 90 days before engaging in virtual currency activities. Additionally, prior approval for certain activities does not extend to general consent for other activities. The DFS highlighted that some actions taken by third-party service providers may also require the agency’s approval.
As much as it pains me to admit this, the @NYDFS Bitlicense accomplishes many of these goals; and the DFS is working closely w/ other regulators like the UK.
— Matthew Sigel, recovering CFA (@matthew_sigel) December 14, 2022
Furthermore, institutions already engaged in virtual currency activities were instructed to check in with their points of contact at the agency immediately. DFS Superintendent Adrienne A. Harris stated, “It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach.”
New York is known for its stringent regulation of crypto businesses and has faced criticism from officials, including New York City Mayor Eric Adams, for potentially stifling economic innovation and growth. Harris has defended the state’s regulatory approach, and the detailed guidance may be particularly beneficial for regulated institutions navigating these waters.
New York was among the first states to license digital currency activities when it established its so-called BitLicense in 2014. The state also claimed to be the first to impose strict requirements regarding stablecoin reserves and redeemability with rules set in June. In December, it proposed adding an annual assessment fee for licensed crypto firms based on new powers granted to the agency in April.
