Tuesday, October 3, 2023

New York Adopts Regulation For Crypto Company Supervision, Enhancing Safety And Consumer Protection

Jesse Powell Kraken CEO and the Attorney General of New York

In a significant move to strengthen the oversight of the burgeoning crypto industry, the New York Department of Financial Services (NYDFS) has adopted new regulations aimed at enhancing consumer protection and ensuring the safety and soundness of crypto companies. Under the new framework, companies will be required to comply with rigorous standards for capitalization, cybersecurity protection, and anti-money laundering protocols.

Rigorous Standards for Capitalization, Cybersecurity, and AML Protocols

The New York Department of Financial Services (NYDFS) has introduced a new regulation outlining the assessment criteria for costs associated with the supervision of crypto companies. As part of the regulation, companies will be required to meet stringent standards in capitalization, cybersecurity protection, and anti-money laundering protocols, according to a statement released by the NYDFS on Monday.

NYDFS Superintendent Adrienne Harris stated, “As the first prudential regulator of virtual currency in the nation, New York has created a framework that sets the highest standards for safety, soundness, and consumer protection while fostering responsible growth.” She added,

“This regulation provides the Department with additional tools and resources to regulate the virtual currency industry now and in the future, as innovators create new products and use cases for digital assets.”

Bitlicense Holders Subject to New Regulation

The new regulation will only apply to companies that possess a DFS-issued Bitlicense, a business license granted by the NYDFS allowing firms to operate in New York. Currently, just 22 companies hold such a license.

Approximately a year ago, the New York State Senate announced its intention to bolster the NYDFS’s efforts in overseeing the cryptocurrency sector. The goal was to align the regulator’s oversight of cryptocurrencies with the level of scrutiny applied to more traditional banks and financial services firms.

The adoption of this new regulation is a significant step forward for the NYDFS and the crypto industry, as it demonstrates New York’s commitment to upholding the highest standards in safety, consumer protection, and responsible growth. As the world of digital assets continues to evolve and expand, the NYDFS’s proactive approach to regulation ensures that both businesses and consumers can benefit from a secure and well-regulated environment.

As the cryptocurrency landscape continues to develop, it is crucial for regulators like the NYDFS to stay ahead of the curve and adapt their frameworks to accommodate the rapidly changing market. The adoption of this new regulation is a clear example of New York’s aim to provide a secure and well-regulated crypto sphere for web3 users. With more innovations and use cases for digital assets expected in the future, the NYDFS’s proactive approach to regulation will be key to maintaining the safety, soundness, and consumer protection that the market demands.

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Shayan Chowdhury

Shayan is a digital nomad and a professional journalist. He delivers high-quality engaging articles to Coinpedia through his in-depth research and analysis.

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On Wednesday, the New York State Department of Financial Services (DFS) introduced a new regulation for the supervision of companies engaging in cryptocurrency activities, raising the bar for consumer protection and safety in the state.

Under the new law, all companies that are taking part in the trading, storage, or conversion of cryptocurrencies will be required to obtain a “BitLicense,” an authorization from the DFS. Companies that receive the license must comply with a number of stringent requirements, such as submitting to ongoing supervision and maintaining strong cyber security measures.

The new law also requires cryptocurrency companies to adhere to certain capital requirements and retain detailed records regarding their operations and customer transactions.

In a statement, Superintendent of Financial Services Maria T. Vullo said, “The regulation of virtual currency businesses under the New York State banking law will continue to be a priority for DFS and this regulation is another step toward ensuring the protection of consumers and markets.”

The regulation of cryptocurrency companies has been a contentious issue, with some arguing that these companies should be subject to greater oversight and consumer protection laws. With the new BitLicense regulations, New York is establishing itself as a leader in consumer protection, while also sending a strong signal to investors and companies that it is open to new financial innovations.

By reinforcing consumer protection principles and improving the safety of cryptocurrency transactions, New York’s BitLicense will help the state lead the charge in the rapidly evolving cryptocurrency sector.

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