New York’s financial regulator, NYDFS, oversees insurance companies and state-chartered banks, playing an outsized role nationally in overseeing the financial services sector. NYDFS superintendent, Adrienne Harris, is looking to use the state’s role as a financial-services leader to help set the regulatory agenda nationwide, with a particular focus on bringing order to the cryptocurrency industry. In a guidance document published recently, the New York Department of Financial Services said it would assess new crypto-related activities proposed by financial institutions based on potential risks they pose to banks and consumers. The guidance provides a detailed process for entities looking to get approval to offer crypto products and services.
U.S. banks and foreign banks with branches in New York that are under NYDFS supervision are now required to notify the agency at least 90 days before starting any new or significantly different crypto-related activities, according to the guidance.
Additionally, banks are required to submit information across six categories: Business Plan, Management of Crypto-related Enterprise-wide Risk, Corporate Government Structure, Consumer Protection, Financial Analysis, and Legal & Regulatory Analysis. A supplemental checklist of documents that banks need to provide has also been included in the guidance.
Ms. Harris says the guidance is needed as traditional financial institutions continue to innovate and the crypto market evolves over time. Ms. Harris also stated that the agency’s application process is designed to review complex companies such as cryptocurrency exchange FTX in a more careful manner to make sure they have sound financials and appropriate risk controls in areas such as anti-money laundering and cybersecurity. NYDFS is pursuing the first step to creating a safer environment for investors in the cryptocurrency industry.
Improvement With Communication Within NYDFS Regulation
“It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach,” Ms. Harris said in a statement. “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.” With regulators communicating and approaching the problem collectively, the solutions created will not be biased and will better cater to consumers rather than it being done solely by one regulator. Is there hope for cryptocurrency in the future?