The New York State Department of Financial Services (NYDFS) has recently introduced new requirements for virtual currency business entities operating in the state. These rules, announced on September 18, primarily focus on cryptocurrency delistings. The aim of these regulations is to provide better protection for consumers and ensure the safety and soundness of the market.
The NYDFS had previously published guidance in 2020, and the recent rules build upon this foundation. The initial guidance outlined a framework for crypto firms to adopt and list new cryptocurrencies, including the concept of “greenlisting.” Greenlisted cryptocurrencies are tokens recognized by the NYDFS and can be listed by companies without prior approval or the need to create specific policies. Currently, Bitcoin (BTC), Ethereum (ETH), and six stablecoins, including PayPal’s newly announced PayPal Dollar (PYUSD), are part of the greenlist.
One significant aspect of the new rules pertains to delisting requirements. While companies are allowed to establish their own listing and delisting policies, all entities that list coins are now mandated to create a delisting policy, even if they do not have an existing listing policy. This shift aims to ensure that companies have a process in place for removing coins from their platforms when necessary. The NYDFS emphasizes the importance of safeguarding consumers and maintaining the integrity of the market.
In addition to delisting requirements, the new guidance includes heightened risk assessment standards for coin-listing policies. Companies are expected to evaluate potential risks associated with listing new cryptocurrencies thoroughly. Furthermore, the rules impose more significant requirements on retail and consumer products and services. These measures aim to enhance consumer protection and mitigate potential risks in the virtual currency space.
The NYDFS has invited public comment on the proposed rules until October 20, 2023. This inclusivity ensures that stakeholders have the opportunity to voice their opinions and provide feedback on the regulatory framework. However, the rules on greenlisted tokens are effective immediately. Entities operating in New York must adhere to these regulations to remain compliant with the state’s strict cryptocurrency rules.
New York has gained a reputation for its exceptionally strict cryptocurrency regulations. Companies that operate or serve customers in the state must obtain a virtual currency license from the NYDFS, either in the form of a BitLicense or a limited-purpose trust company charter. Currently, only 33 companies have obtained some combination of these licenses, highlighting the stringent nature of the requirements. Additionally, the NYDFS has recently advised companies to segregate corporate and non-corporate crypto assets and announced new supervision charges for crypto firms. The state also enforces cryptocurrency regulation through the New York Attorney General’s Office, headed by Attorney General Letitia James.
The NYDFS’s introduction of new rules for virtual currency business entities in New York highlights the state’s commitment to robust regulation in the cryptocurrency market. By emphasizing delisting requirements, risk assessment standards, and consumer protection, the NYDFS aims to ensure the safety and soundness of the industry. Industry stakeholders have the opportunity to provide their input during the public comment period, further reinforcing the importance of inclusive decision-making. As New York continues to lead the way in cryptocurrency regulation, companies operating within the state must stay abreast of these evolving requirements to maintain compliance and operate within the boundaries of the law.