NYDFS has published information on working with client assets for crypto firms
2023.01.23 15:01
NYDFS has published information on working with client assets for crypto firms
By Tiffany Smith
Budrigannews.com – Guidelines on how licensed crypto firms should handle customer assets in the event of “insolvency or similar proceeding” have been issued by the New York Department of Financial Services, or NYDFS.
Adrienne Harris, the superintendent of the NYDFS, made the following statement on January 23: “Crypto exchanges and firms operating under a BitLicense, which is required in New York state, should segregate corporate funds from users’ virtual currency holdings both on-chain and in the company’s custodian’s “internal ledger accounts.”
Cryptocurrency businesses are expected to hold users’ assets “only for the limited purpose of carrying out custody and safekeeping services,” according to the regulator.
“The parties’ intentions to enter into a custodial relationship, rather than a debtor-creditor relationship should be made clear in the customer agreement for a [virtual currency entity’s] customer.”
In addition to these rules, the NYDFS said that all licensed companies that store assets should “maintain appropriate books and records” and tell customers about their products and services in the terms and conditions. According to Harris, the guidance aimed to “safeguard customer assets.”
ICYMI: Regulatory Guidance was issued by Superintendent Adrienne A. Harris to better safeguard customers in the event of an insolvency or similar proceeding.
The announcement came after several US-based cryptocurrency exchanges, including FTX, BlockFi, Voyager Digital, and Genesis, filed for Chapter 11 bankruptcy protection due to alleged liquidity issues. During the bankruptcy proceedings, many of the crypto companies’ former customers have not been compensated.
In reference to New York’s BitLicense system, Harris stated in a speech in November 2022 that lawmakers at the federal level should consider a “framework nationally that looks like what New York has” in terms of crypto regulation. Additionally, the NYDFS has previously issued regulatory guidance for stablecoins backed by the United States dollar.
