DFS releases virtual currency guidance

The New York State Department of Financial Services on Thursday released guidance to financial institutions that wish to engage in virtual currency-related activities. The guidance is applicable to all New York-regulated banking organizations and branches and agencies of foreign banking organizations licensed by DFS.

According to DFS, the guidance does not interpret existing law or regulation and does not otherwise take a position on the types of activities that may, as a legal matter, be permissible for covered institutions to undertake. Rather, the guidance describes the process covered institutions should observe for seeking prior approval for a proposed virtual currency-related activity and summarizes the types of information the Department considers relevant in assessing such a proposal.

The guidance states that covered institutions are reminded of the current requirement to seek prior approval before commencing virtual currency-related activity, including where any portion of those activities will be conducted by a third party.

The guidance outlines six broad categories of information that DFS will consider in assessing a covered institution’s proposal:

  • business plan;
  • risk management;
  • corporate governance and oversight;
  • consumer protection;
  • financials; and
  • legal and regulatory analysis.

The guidance also includes a supplemental checklist of initial documents and information that a covered institution should provide for DFS to consider in its assessment.

“The Department takes seriously the potential risks that novel activities, including in particular virtual currency-related activities, may pose to covered institutions, to consumers, and to the market in general, and the Department will make a comprehensive assessment of information presented under this guidance to determine whether any proposed activity would — based on the facts and circumstances presented and including the risk mitigation measures the covered institution has developed to support the activity — be appropriate for a covered institution to undertake,” according to DFS.

The guidance is final; however, comments may be sent to bankingcomments@dfs.ny.gov.

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