NYDFS Says Financial Institutions Must Seek Approval for Crypto Activities

A New York regulator has reiterated that financial institutions need prior approval for cryptocurrency activities.

The New York Department of Financial Services (DFS) released guidance Thursday (Dec. 15) to New York regulated banking organizations and department-licensed foreign banking organizations’ branches and agencies that want to begin activities related to virtual currencies, DFS said in a Thursday press release.

The guidance reminds these covered institutions that they are currently required to seek prior approval before beginning such activities — including those that involve a third party, according to the release.

It also outlines the information that DFS will consider in assessing a proposal and includes a checklist of documents and information that a covered institution should provide for DFS to begin and consider its assessment, the release said.

“It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach,” DFS Superintendent Adrienne A. Harris said in the release. “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 information to be considered falls into six broad categories, including the business plan, risk management, corporate governance and oversight, consumer protection, financials, and legal and regulatory analysis, according to the release.

In addition, any covered institution already engaging in such activity must immediately notify their point of contact at the DFS, if they have not already done so, the release said.

While the guidance is final, DFS invited stakeholders to email their comments and said it will consider them as it refines the supervisory framework.

As PYMNTS reported in January, the New York DFS is one of the toughest and most respected regulators of virtual currency in the United States.

Its head controls New York’s BitLicense, which has long been seen as both the gold standard in the regulation of cryptocurrency businesses in the U.S. and a regime so tough that many perfectly legitimate companies fled the state — and won’t do business with New Yorkers. However, it also gives those that have stayed substantial credibility within the traditional financial community.

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