NYDFS has issued guidance for regulated banks that seek to engage in “virtual currency-related activity.” The guidance requires prior approval based on submission of such items as a business plan, evaluation of risk management, governance structures, and financials. Unsurprisingly, and especially in this environment, consideration of consumer protection is central: “The Department has a particular interest in ensuring that all customers of a Covered Institution and other users of a Covered Institution’s product and services, including individual consumers, are treated fairly and are afforded the full protection of all applicable laws and regulations, including protection from unfair, deceptive, or abusive practices.”
The guidance defines “virtual currency-related activity” to include all “virtual currency business activity,” as that term is defined in 23 NYCRR § 200.2(q), as well as the direct or indirect offering or performance of any other product, service,
or activity involving virtual currency that may raise safety and soundness concerns for the Covered Institution or that may expose New York customers of the Covered Institution or other users of the product or service to risk of harm. For example, the Department considers the following types of activities, among others, to be virtual currency-related activities:
- offering digital wallet services to customers, whether the services are in fact provided by the Covered Institution or by a third party with which the Covered Institution has contracted;
- lending activities collateralized by virtual currency assets; activities in which a Covered Institution facilitates its own customers’ participation in virtual currency exchange or trading, including by carrying fiat currency on behalf of customers (e.g., in an omnibus account);
- services related to stablecoins, including providing stablecoin reserve services for stablecoin issuers; engaging in traditional banking activities involving virtual currency through the use of new technology that exposes the Covered Institution to different types of risk (e.g., underwriting a loan, debt product, or equity offering effected partially or entirely on a public blockchain).
The guidance may be found here: https://www.dfs.ny.gov/system/files/documents/2022/12/il20221215_prior_approval.pdf