Recent developments about the New York State Department of Financial Services
(Not affiliated with NYDFS; just a blog.)
NYDFS has announced that it has taken steps to increase its ability to detect virtual currency fraud. In a press release, DFS stated: “The new enhancements will provide the Department with additional capabilities to detect potential insider trading, market manipulation, and front-running activity associated with Department-regulated entities’ and applicants’ exposure or potential exposure to listed … Read more
According to Forbes [HERE]: “According to a source familiar with Paxos, the company was not aware that Binance intended to manually port the token [BUSD] onto other blockchains. When these revelations came to light, the DFS held multiple meetings with the company in January. The source said, ‘I can say with absolutely 100% confidence that … Read more
DFS has ordered Paxos to stop issuing BUSD stablecoin, one of the most widely held and traded. According to DFS: “DFS has ordered Paxos to cease minting Paxos-issued BUSD as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance through Paxos-issued BUSD. In response, on February 13, 2023, Paxos … Read more
This is what it looks like as digital asset firms reach for normative compliance: Anchorage Digital Bank, a crypto-focused bank, has responded to sharp criticism from the OCC, its regulator, with a series of hires showing real depth in BSA/AML/OFAC compliance. Anchorage Digital, the first digital asset bank to be issued a charter by the … Read more
NYDFS Superintendent Adrienne A. Harris interviewed with the Capitol Pressroom Podcast. Here are some hottakes: • NYDFS would have denied FTX’s then-pending application for a BitLicense because the firm engaged in crypto lending which is not permitted under the BitLicense. • Re: cryptocurrency regulation generally: “I can confidently say New Yorkers will fare much better than citizens in … Read more
NYDFS Superintendent Adrienne A. Harris told Reuters that she expects more BSA/AML enforcement against cryptocurrency firms: “Crypto firms’ compliance with anti-money laundering rules has also been ‘a big issue,’ she said, one she expects her office will continue focusing on in 2023….”We’ve really been working hard, not just through enforcement, but through examination, and just … Read more
In a filing in New York bankruptcy court, NYDFS objected to Binance’s acquisition of the customer assets of Voyager, which has filed for Chapter 11, saying the acquisition “both furthers [Voyager’s] unlawful unlicensed crypto-currency-related activities in New York and does so to the discriminatory disadvantage of New York consumers.” Some takeaways: • DFS alleges Voyager unlawfully opened … Read more
NYDFS issued an enforcement action against Coinbase Inc., alleging a variety of compliance failures. Some details: – $50MM penalty; $50MM commitment spend on compliance; Continuation of Independent Monitor – “During much of the relevant period, Coinbase’s KYC/CDD program, both as written and as implemented, was immature and inadequate. Coinbase treated customer onboarding requirements as a … Read more
In a joint statement of the FRB, OCC and FDIC, the lead federal banking regulators continued in a posture of wariness towards cryptocurrency: “Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized … Read more
NYDFS issued a so-called “Pre-Proposal” for regulation providing for assessments of entities with a BitLicense, pursuant to the New York budget legislation passed in the Spring authorizing these assessments. Cryptocurrency entities chartered by NYDFS as a limited purpose trust charter will continue to be assessed under the regulations issued under the Banking Law. Comments on … Read more