DFS SUPERINTENDENT ADRIENNE A. HARRIS ANNOUNCES NEW PROPOSED VIRTUAL CURRENCY ASSESSMENT REGULATION
The Proposed Regulation Sets Forth Process for Department to Assess Operating Costs for Virtual Currency Businesses, On Par with Regulated Banking and Insurance Entities
Superintendent of Financial Services Adrienne A. Harris announced today that the New York State Department of Financial Services (DFS) has published for public comment a proposed regulation establishing how licensed virtual currency businesses would be assessed for costs of their supervision and examination.
The proposed regulation effectuates a provision in the New York State FY23 Budget giving DFS new authority to collect supervisory costs from licensed virtual currency businesses, similar to other licensed financial institutions in the state. These regulations will allow the Department to continue adding top talent to its virtual currency regulatory team.
Today, DFS is the only entity in the world that has a robust, prudential regulatory framework specifically for virtual currency companies. DFS’s regulation and subsequent guidance provides transparent and timely rules to ensure the safety and soundness of the entities we regulate, protect consumers, and root out financial crimes like money laundering and terrorist financing – from rigorous capitalization requirements, to strict reserving and redemption standards, the tailored cybersecurity and AML standards similar to those that apply to banks, and a prohibition on lending of customer assets for institutional profit. As the virtual currency industry evolves, DFS is leading by doing, and will remain committed to keeping New York the model for robust, forward-looking regulation. Today’s actions help advance this important work.
“New York State has been regulating virtual currency companies since 2015 with a robust prudential framework. Through licensing, supervision and enforcement, we hold companies to the highest standards in the world. This assessment authority will allow the Department to continue building the team that is leading the nation with a suite of regulatory tools,” said Superintendent Harris. “The ability to collect supervisory costs will help the Department continue protecting consumers and ensuring the safety and soundness of this industry.”
Over the past few months, the Department has conducted in-depth research and met extensively with key stakeholders to inform the new proposed virtual currency assessment regulation, which only applies to entities licensed pursuant to 23 NYCRR Part 200. At the time that DFS’s first-in-the-nation virtual currency regulation was adopted in 2015, the Financial Services Law did not include a provision for the assessment of operating costs, similar to Banking and Insurance Law. Entities licensed as a limited purpose trust company or a banking organization will continue to be assessed under 23 NYCRR Part 101.
The proposed regulation is subject to a 10-day preproposal comment period beginning today, followed by a 60-day comment period upon publication in the State Register. DFS looks forward to and appreciates receiving feedback to the proposed regulation during the comment period. The Department of Financial Services will then review all received comments and issue a revised proposal or a notice of adoption of the final regulation.
A copy of the proposed regulation can be found on the DFS website.