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The New York State Department of Financial Services (DFS) has handed out guidance to regulated banks that wish to engage in activities related to cryptocurrencies. DFS has provided these banks with a checklist of submission requirements for the state regulator seeking to conduct businesses in crypto.
The guidance went into effect immediately, states the application process, and “summarizes the types of information the Department considers relevant“ to acquire the agency’s approval.
This guidance document comprises of 11-pages which shape the information through bullet points and represents the informational requirements for various categories such as “Business Plan” and “Consumer Protection” in particular, along with other formal checklists.
The guidance embodies the urgency to pass regulations that will govern the sector better and effectively. Many institutions have issued fresh guidelines regarding how to oversee the industry in order to protect users. The checklist has emphasised that its target is to evaluate new crypto-related activities proposed by the banks depending upon the risks and threats they pose to the traditional financial institution.
Details About The Crypto Guidelines
This clarification guideline urges the regulated banks to submit a business plan to the regulator at least 90 days in advance. However, approval for prior activities “does not constitute general consent” said the document. Some other activities by the third-party service providers might come under the radar and require the agency’s approval too.
Additionally, the institutions that are already involved with cryptocurrency activities were ordered to comply with the guidelines and to be in sync with their respective points of contact at the agency immediately.
DFS Superintendent Adrienne A. Harris stated in the guidelines:
It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach.
The checklist primarily includes six conditions which will need the banks to work and provide sufficient information if they require approval for the virtual asset-based activities. The banks are needed to provide data in these six categories:
- The financial model of the crypto-based activity
- The ways they plan on managing enterprise-wide risks which are tied to the digital asset sector
- Details about creating a corporate governance framework
- Plans on protecting investors and their money
- Legal and regulatory analyses
- Additional list of documents that institutions must submit before they begin operations
Could This Move Be Suppressing The Industry?
In recent times, New York has been tough in terms of regulating the industry. This has attracted disapproval from New York City Mayor Eric Adams and others. They are of the opinion that stringent policies could restrain innovation and growth in the economy. Superintendent Harris has opposed this thought, as he believes that regulation will be valuable to the growth of the economy.
New York was one of the first states to provide licences for crypto-related activities. It had sanctioned a licence called the BitLicense in 2014. It introduced the regulations this year in the month of June, claiming that it was one of the first states to implement strict guidelines to regulate stablecoin reserve and redeemability.
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