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The New York Department of Financial Services (NYDFS) has issued new guidelines for banks as cryptocurrency exchanges come under scrutiny after the demise of FTX.
The Empire State’s premier financial regulator, the NYDFS, has announced that all banking institutions within its jurisdiction must seek prior authorization if they wish to get involved in the crypto space.
Appointed agency on December 15th letter He informed banking industry officials that any involvement in cryptocurrency-related activities should first be reported to authorities. Only if approved may such entities engage in permitted initiatives.
NYDFS said those requests apply to all New York-based banking organizations.
It also covers all branches and agents of foreign banks and other financial providers licensed to operate in the state. Together, the regulator referred to the subject bodies as “covered bodies.”
“Covered Institutions must seek the department’s prior approval before commencing any new or significantly different cryptocurrency-related activityNYDFS wrote.
But even if their involvement in cryptocurrencies is approved, banks still need additional authorization to undertake new activities.
“A Covered Institution’s prior approval to engage in Virtual Currency-related activities does not constitute a general consent for such Institution to engage in other types of Virtual Currency-related activities, and other Covered Institutions nor does it authorize the, the letter reads in part.
NYDFS’ latest regulatory action comes in the aftermath of the FTX implosion. This is by far the most devastating setback for cryptocurrencies in his year dictated by multiple bankruptcies and huge losses for investors.
However, the agency sees the crypto market as one that continues to evolve and innovate. This is part of a growth trajectory with several banks looking to offer a range of crypto products and services.
The guidance is therefore part of a thorough assessment before banks engage in digital asset-related activities, with the aim of ensuring consumer safety.
The agency noted that the requirements will take effect immediately and will only apply in addition to existing laws and regulations.
