March 27, 2024
New York Financial Watchdog Sets Stricter Guidelines for Crypto Listings and Delistings
Policy & Regulation

New York Financial Watchdog Sets Stricter Guidelines for Crypto Listings and Delistings

The financial watchdog for New York wants cryptocurrency firms subject to state regulation to be more open regarding how they list and delist digital money.

Based on an earlier iteration of the framework, the New York State Department of Financial Services outlines its expectations for how cryptocurrency firms assess a coin offering before adoption in proposed guidance that will be issued on Monday. The regulator also outlines the procedures and standards a cryptocurrency company must follow before delisting a coin.

The suggested structure is intended to serve as a manual for businesses creating their currency listing and delisting rules.

NYDFS Superintendent Adrienne Harris stated that the modifications resulted from inadequacies discovered during exams and that guidance was required to strengthen the rules around currency offerings. Additionally, she stated that the new advice will be the first to address delisting.

“When we know that a coin that someone once thought was OK is being misused and we see that new risks have emerged or the coin is being misused, we want our entities to have a way to delist the coin in a way that’s still protective of consumers and protects safety and soundness as well,” she stated.

The NYDFS is requesting revised coin-listing and delisting practices from virtual currency enterprises registered in the state as part of the proposal. Public comments on the draft legislation are welcome until October 20.

Until a coin is on a so-called “green list” of coins already approved by the regulator, according to original framework guidance published in 2020, crypto companies regulated by NYDFS must present a firm-specific coin listing policy and seek the regulator’s permission before listing or offering custody for a coin. The listing policy needs to take into account a company’s operations, consumers, and business strategy, among other factors.

A firm can self-certify a listing after getting regulatory clearance for its coin-listing policy, attesting that a coin satisfies the firm’s standards without first requesting approval from NYDFS. However, the business must still notify NYDFS in writing before using any coins and keep the regulator updated on every coin it offers or utilizes.

The new framework requests that cryptocurrency companies develop their coin-listing policies in three areas: protocols for coin monitoring, risk assessments, and governance for the coin-listing process.

The suggested delisting structure requires businesses to explain their decision-making process, the kinds of circumstances that might lead to removal, and their execution strategies, such as notifying customers in advance and creating an effect study.

The frameworks are being offered as Harris completes her second year in office as New York’s top financial regulator. NYDFS has been attempting to exploit the state’s position as a national leader in banking and insurance regulation to help shape the regulatory agenda for cryptocurrency.

Under her direction, the NYDFS has fined crypto firms, including the exchange Coinbase and the crypto division of online trading platform Robinhood, a total of $132 million.

In March, amidst chaos on the cryptocurrency market, the agency also managed the collapse of Signature Bank. According to a Federal Deposit Insurance Corp. declaration dated March 20 and relating to Signature Bank’s digital asset banking operations, there were about $4 billion in deposits.

“We’re continuing to supervise the risk-based analysis of our entities, make sure those examinations are going well, and make sure the entities are remediating on time. We will, of course, continue to bring enforcement actions where necessary,” Harris stated.

She pointed out that the crypto unit at her organization has roughly 60 employees, nearly double from 2 years ago.

Image: Freepik

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