New York’s DFS Proposes Regulation To Charge Crypto Firms For Supervising Them

Key Takeaways

  • DFS states crypto firms will be charged based on the total operating expenses of overseeing licensees and the “proportion deemed reasonable” for other operating/overhead expenses.
  • The publication of the draft regulation starts a 10-day pre-proposal comment period beginning on December 1

The New York State Department of Financial Services (NYDFS) has proposed a regulation change in its state laws that would allow the agency to charge New York-regulated crypto firms for regulating them.

As per the proposal, the Department of financial services would charge firms based on the total operating expenses of overseeing licensees and the “proportion deemed just and reasonable” for other operating/overhead expenses.

Only crypto companies with a BitLicense will be subject to the assessments. A BitLicense is a common term used for a business license for virtual currency activities issued by DFS under regulations designed for companies. Currently, only 22 companies hold a BitLicense, and only three have been issued so far in 2022.

The proposal was led by DFS Superintendent Adrienne Harris. The publication of the draft regulation starts a 10-day pre-proposal comment period beginning on December 1, followed by a 60-day comment period after the draft proposal is published in the State Register. Following this, NYDFS can either issue a revised proposal or publish a notice of the adoption of the regulation in its current form.

The latest development comes half a year after the New York State Senate authorized NYDFS to develop a new “assessment” or charge for the cryptocurrency companies it oversees.

Commenting on DFS’ new proposal, NYDFS Superintendent Adrienne Harris stated that the additional funding would allow the Department to continue adding top talent to its virtual currency regulatory team.

“Through licensing, supervision, and enforcement, we hold companies to the highest standards in the world,” Harris said, adding that “the ability to collect supervisory costs will help the Department continue protecting consumers and ensuring the safety and soundness of this industry.”

In the wake of several crypto behemoths like FTX, and Celsius collapsing recently, the DFS has been taking a cautionary approach toward crypto. Earlier this month, DFS commissioner Adrienne Harris participated in a countrywide discussion on regulatory reform for crypto. She believes that any future federal law regarding virtual assets should not collide with or overwrite existing state regulatory systems.

She further talked about the extensive crypto registration process followed in New York, which includes aspects such as assessing the company’s organizational structure, its executives’ fitness, AML-Anti-Money Laundering, and KYC-Know Your Customer regimes as to ensure the financial safety for all investors.

Saniya Raahath
Saniya Raahath

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