Banks In New York Must Get Regulatory Nod Before Becoming Involved In Cryptos

Zinger Key Points
  • Banks in New York will be required to provide the state's Department of Financial Services with business plans and operating models.
  • Those already engaged in cryptocurrency need to notify regulators "immediately" if they have not previously.

Banks registered in New York State must request regulatory approval 90 days prior to engaging in crypto assets, even if it is through a third party, according to the New York Department of Financial Services.

According to the guidance released on Thursday, banks will be required to provide the Department of Financial Services with business plans and operating models that include information about the clients they want to serve.

In a statement, Superintendent Adrienne Harris said, “Today’s guidance is critical to ensuring that consumers’ hard-earned money is protected, that New York regulated banking organizations remain resilient and competitive, and that the expectations are clear for those that wish to submit proposals for virtual currency-related activity."

The guidance also stated, "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."

Also Read: You Think FTX Was Bad? Investors Suffered Far Greater Losses From Terra: Report

Before approving plans, the regulator wants banks to determine whether there are risks of defrauding customers, cyberattacks or compromising the bank's capital foundation, the guidance further stated.

Those already engaged in cryptocurrency need to notify regulators "immediately" if they have not previously, the Department said.

FTX Contagion?

This new guidance applied to a wide variety of crypto services, including transmission, custody, purchasing and selling, even if they are run through a third party under contract.

Department of Financial Services’ guidelines came weeks after beleaguered cryptocurrency exchange FTX, its U.S. subsidiary FTX US and sister firm Alameda Research, as well as approximately 130 additional affiliated companies filed for Chapter 11 bankruptcy in a U.S. court.

Earlier this week, the crypto exchange’s founder Sam Bankman-Fried was arrested in the Bahamas, while he had been simultaneously charged with criminal activities by the Department of Justice, Securities and Exchange Commission and the Commodities Futures Trading Commission.

Read Next: Analysis: Will Binance Succumb To Crypto Market Fears?

Photo: BestStockFoto via Shutterstock

Market News and Data brought to you by Benzinga APIs
Posted In: CryptocurrencyGovernmentNewsRegulationsTop StoriesHotMarketsCFTCDepartment of Financial ServicesFTXnew yorkNew York StateSam Bankman FriedSecurities and Exchange CommissionU.S. Department of Justice
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!