Recent developments about the New York State Department of Financial Services
(Not affiliated with NYDFS; just a blog.)
Speaking at the Institute of International Bankers Annual Conference in DC, Superintendent Harris discussed the following: • CHARACTER AND FITNESS FOR BANKING EXECS: Superintendent Harris responded to “the buzz” about this recent DFS guidance, saying it should be unsurprising that regulated banks would want to screen out personnel in sensitive positions with criminal records, dire financial problems, … Read more
NYDFS penalized Genesis Global Trading, a licensee that served primarily as an OTC trading shop, $8MM for cybersecurity, BSA/AML, and Consumer Protection violations. Genesis Global has now surrendered its license, apparently after having ceased trading activity some time ago. According to DFS allegations: • Genesis Global did not conduct an enterprise-wide risk assessment until 2022, despite … Read more
In conjunction with its proposed guidance, DFS has significantly trimmed “Greenlisted” coins. It has cut the list to Bitcoin, Ethereum, and several stablecoins. Until recently it had Greenlisted approximately two dozen coins. These changes are part of the Department’s initiative seeking to strengthen DFS oversight of virtual currencies, which include new guidance coin listing and … Read more
The New York Attorney General entered into a settlement with BitCoin seller and NYDFS licensee Coin Cafe over allegations of failure to register with the NYAG’s Investor Protection Bureau and charging excessive fees. According to NYAG allegations in its Assurance of Discontinuance: • Coin Café — apparently only a seller of only Bitcoin – nonetheless failed … Read more
FROM NYDFS SUPERINTENDENT HARRIS’ PREPARED TESTIMONY BEFORE US SENATE BANKING COMMITTEE ON DFS REFORMS FOLLOWING BANKING CRISIS: “DFS has been monitoring the liquidity of [high risk] institutions on a daily basis, which entails frequent engagements with these institutions, as well as close coordination with our federal counterparts. . . . I directed DFS’s Office of … Read more
Here are some quick impressions: • Provides expansive new authority to the NYAG to regulate and enforce in the crypto market • Appears to codify the DFS BitLicense, which is now set by regulation • Sets up competing enforcement regimes and specifically contemplates conflict by requiring the “attorney general and the [DFS] superintendent shall cooperate, coordinate and assist … Read more
NYDFS issued an enforcement action against bitFlyer USA, Inc., a cryptocurrency exchange, obtaining a $1.2 million penalty. Takeaways from DFS allegations: • No specific cyber event was involved – enforcement was based on violations identified over two examination cycles • This suggests cybersecurity is now well integrated into the DFS examination process • Core violations included the lack … Read more
DFS Virtual Currency Peter Marton testified on April 25 before the New York Senate Banking Committee. Some takeaways from his testimony: • Virtual currency division has hired 40 new staff since Jan. 2022, with total reports of 57 • The application backlogs remains; DFS has granted four BitLicenses in last 15 months • The application queue remains high, but … Read more
Superintendent Harris announced today final adoption of the assessment regulation. Quick takeaways: • The adopted regulation effectuates legislation in the NYS FY23 Budget giving DFS authority to collect supervisory costs from licensed virtual currency businesses, similar to other licensees regulated by DFS. • Says DFS: “As stewards of others’ assets, virtual currency entities play an important role in the … Read more
NYDFS Superintendent Harris has called for “real time” regulation of crypto, according to Axios: “Harris appears to want to tighten the screws on crypto regulation, with what she’s calling: “real-time supervision.” “This idea that regulators should just come in once a year, go through books and interview staff … was fitting maybe for the 20th-century … Read more