NYDFS presents crypto guidelines for banks

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Listen to the article 4 min This audio is automatically generated. Please let us know if you have any comments. Dive Brief: Banks supervised by the New York Department of Financial Services (NYDFS) must seek pre-approval before engaging in crypto-related activities, the regulator said in guidelines released Thursday. Firms already involved in crypto activities should notify NYDFS immediately, the agency said. The NYDFS considers six broad categories when evaluating an institution proposal: business plan, risk management, corporate governance and oversight, consumer protection, finance, and legal and regulatory analysis, said the agency. Those seeking approval must also provide a checklist of documents and information for NYDFS to review. Overview of the dive:

NYDFSsguidance draws inspiration from several other regulators. The Federal Deposit Insurance Corp. (FDIC) asked banks in April to notify the agency if they engage in crypto business.

The Federal Reserve asked banks in August to notify their primary point of contact at the central bank to ensure the activity is legal.

The Office of the Comptroller of the Currency (OCC), by comparison, outlined some activities it considered legal while the Fed did not and allowed banks to engage in those activities as long as ‘they demonstrate they have adequate controls in place and get regulators not to. -objection first.

By revealing its judging criteria, NYDFS can come close at least in detail to the OCC.

It’s critical that regulators communicate in a timely and transparent manner about our evolving regulatory approach, NYDFS Superintendent Adrienne Harris said Thursday. Today’s guidance is essential to ensuring that consumers’ hard-earned money is protected, that New York’s regulated banking organizations remain resilient and competitive, and that expectations are clear for those wishing to submit business proposals. activity related to virtual currency.

U.S. banks and foreign banks that intend to begin virtual currency-related business must submit a proposal at least 90 days before planning to engage in the business, NYDFS said.

Banks that use third parties to engage in crypto-related activities must also comply with the guidelines, the agency said.

The advice comes amid an implosion in the crypto industry, which has seen several high-profile bankruptcies, including FTX, BlockFi, Voyager and Celsius.

The departmental review process is designed to ensure that supervised institutions have appropriate financial capabilities and risk management, Harris told The Wall Street Journal.

Although FTX claimed it was seeking a license in New York when it filed for bankruptcy, an NYDFS spokesperson said the crypto exchange did not get approval, the point noted. sale.

Sens. Elizabeth Warren, D-MA, and Tina Smith, D-MN, have called on the Fed, OCC, and FDIC to review the relationship between banks and crypto firms after the collapse of FTX.

The OCC, for its part, reiterated its concern over banks’ approach to crypto assets in its semi-annual risk outlook a week ago. The agency advised financial institutions to take a cautious and phased approach to ensure that appropriate risk management controls and practices are in place before expanding or engaging in additional business.

NYDFS this month proposed charging state-licensed crypto firms for oversight and review.

As the virtual currency industry evolves, DFS leads by practice and will remain committed to making New York the model for strong, forward-looking regulation, the agency said at the era.

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