The New York State Department of Financial Services (NYDFS) announced that it will commence billing cryptocurrency entities registered in the state and in return, subject them to annual inspection and supervision.
Adrienne Harris, Superintendent, explained that the fees payable will differ based on the size and complexity of each organisation.
Nearer to Banks with Crypto
The NYDFS has stated that the new regulation will apply to those entities that have already obtained the so-called ‘Bitlicense’. The regulatory regime adopted in 2015 demands that crypto-related businesses meet different standards for capitalization, anti-money laundering protocols, and cyber-security protection.
Each organisation will pay fees five times per fiscal year comprising four estimated quarterly settlements and one fee based on the actual expenses incurred. The legislation coincides with the start (April 1) and end (March 31) of New York’s financial year.
The amendment’s goal is to align the cryptocurrency sector more closely with banking organisations and insurance firms since they are bound to pay annual fees to the NYDFS in exchange for providing oversight. Superintendent Harris thinks that the local digital asset sector could benefit substantially from collaborating with the watchdog:
“When you can work hand-in-hand with your regulator and your examiners, we can help identify issues early before they metastasize, and it really is a service that we can provide to the industry, and it helps us as regulators better oversee the markets and protect consumers.”
Eric Soufer, an executive at consulting firm Tusk Strategies, praised the NYDFS for its approach toward the crypto field and noted that it was one of a few that realised the importance of relevant regulations in this space:
“I think the industry recognises that New York is the only state that regulates crypto in a comprehensive and proactive way.”
NYDFS’ Previous Guidance
The regulator had previously urged companies operating in NY to keep clients’ holdings of cryptocurrency separate from their own assets since co-mingling could cause significant financial losses. They must also release records and maintain a “clear internal audit trail” to inform their clients about any transactions involving their funds.
The NYDFS highlighted the growing interest in digital assets in recent years and believed that the market needs to operate under a comprehensive regulatory structure:
“As stewards of others’ assets, virtual currency entities (VCE) that act as custodians play an important role in the financial system and, therefore, a comprehensive and safe regulatory framework is vital to protect customers and preserve trust.”