By Hannah Lang
-The New York State Department of Financial Services (NYDFS) on Thursday issued digital asset guidance to state-regulated banks laying out what information financial institutions must submit before getting approval to engage in virtual currency-related activities.
The guidance, one of the clearest paths forward yet for banks to offer cryptocurrency services, instructs banks to submit a business plan with details of the proposed activity, detail how such a service would impact the bank’s capital and liquidity and inform NYDFS of its plans at least 90 days beforehand.
In a statement, NYDFS Superintendent Adrienne Harris said the new policies are “critical to ensuring that consumers’ hard-earned money is protected” and that New York-regulated banks remain competitive.
The regulator will “make a comprehensive assessment” of the information presented under the guidance to determine whether a bank should be permitted to engage in a proposed crypto-related activity, according to an industry letter sent Thursday to regulated institutions.
Such activities could include safeguarding cryptocurrency on behalf of customers or offering clients exposure to certain digital assets.
As part of the business plan banks are expected to submit to NYDFS, banks should detail a comprehensive risk assessment for the service they wish to engage in, as well as expected costs of the project and what relevant consumer protection policies will apply.
The guidance is effective immediately, NYDFS said.
It follows a tumultuous month for cryptocurrencies, sparked by the collapse of FTX, one of the largest crypto exchanges, which filed for bankruptcy Nov. 11. Its founder and former chief executive officer Sam Bankman-Fried was charged by federal prosecutors on Tuesday with misappropriating billions of dollars and violating campaign finance laws.