On Thursday, New York’s Department of Financial Services (DFS) released guidance for banks that want to engage with virtual currencies (VC). The information concerns all banking institutions within the state of New York, as well as licensed foreign branches and agencies.
The guidelines restate that prior approval is needed for banks to involve themselves with any kind of virtual currency. Applications must be sent to the DFS 90 before the activity begins.
“It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach,” said Superintendent Harris. “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.”
The guidance explicitly states that involvement with digital currencies includes offering digital wallet services to customers and involvement in stablecoins.
It also includes the broad category of “engaging in traditional banking activities involving virtual currency through the use of new technology that exposes the [banks] to different types of risk.” Despite stating that the published guidance is final, the DFS invites stakeholders to provide feedback.
The guidance does not elaborate on the unpopular BitLicense rule. The regulation requires businesses to obtain approval before conducting Virtual Currency Business Activity involving New York or a state resident.
What is the DFS?
Former Governor Andrew Cuomo founded the modern DFS in 2011. He famously resigned in 2021 after a sexual harassment scandal that made national headlines. The department is the result of a merger of the New York State Insurance Department and the New York State Banking Department. Its remit includes almost all commercial financial activity in the state.
Governor Kathy Hochul nominated the current Superintendent, Adrienne A. Harris, in August 2021. Harris is seen by many as pro-industry and is generally seen as progressive in financial regulation. Under her, the DFS was the first state financial regulator to establish a Climate Divison. She had previously been an advisor in the Treasury and a member of the National Economic Council.
She has also previously advised a number of Fintech organizations. In a press release last month, the Revolving Door Project lambasted Harris as another “Fintech Friendly Regulator.”
“Harris’s pro-industry approach is not just rhetoric… At a critical juncture such as this where the industry seeks kid-glove treatment from regulators, backgrounds such as Harris’s should be disqualifying.”
More Banks Are Engaging With Digital Currencies
These guidelines are a long way from the uneducated and solely adversarial relationship to crypto of nearly a decade ago. In 2013, the new department issued a Notice of Inquiry into virtual currencies. With even the most experienced financial experts out of the loop, the DFS sought to seek expertise on the matter. The state sent 22 subpoenas to “bitcoin-related” companies for insight.
In a statement from the department at the time, they said: “If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.”
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
