

Guidance Date: 12/11/2019
Virtual Currency Businesses Guidance
Introduction
In July 2014 the New York State Department of Financial Services (DFS) released for public comment a proposed regulatory framework for virtual currency firms and in the summer of 2015 the Department finalized its regulations before beginning to issue licenses that fall. Since 2015, DFS has granted two dozen such licenses and charters to ensure that New Yorkers have a well-regulated way to access the virtual currency marketplace and that New York remains at the center of technological innovation and forward-looking regulation.
To provide regulatory clarity and efficiency, and to ensure that our approach to regulating virtual currency businesses reflects the realities of an evolving market, we are reviewing our virtual currency regulations and the manner in which they are implemented. In the nearly five years since DFS issued regulations on this topic, some of our regulated virtual currency licensees (VC licensees), including both those holding BitLicenses and those holding trust charters, have asked to list new virtual currencies (coins) in addition to those included in their initial applications to DFS. Over that time period, there has been exponential and continued growth in the number of coins available in the market.
To enhance efficiency and enable VC licensees to offer and use new coins in a timely fashion, DFS is seeking comments from all interested parties and the general public regarding the following two proposed coin adoption or listing options that DFS wishes to make available to VC licensees. Comments should be submitted by January 27, 2020 to [email protected]. (Please use “Proposed Coin Listing Policy Framework” in the subject line. Note that comments may be subject to public inspection, and should not include any sensitive or confidential information.)
Once a VC licensee’s coin-listing policy is approved by DFS, subsequently, the licensee will be able to self-certify to DFS that its proposed adoption or listing of new coins comply with the requirements of its DFS-approved company coin-listing policy, and provide written notice to DFS of its intent to offer and use any such new coins, including details of the usage and offering of such coins, prior to using or offering such coins. In such case, no prior DFS approval will be required, only a prior notice.
VC licensees that do not have DFS-approved company coin-listing policies are required to seek the prior approval of DFS with respect to any coin other than those listed under 1 above, if they have not already received DFS’s prior approval.
All VC licensees are required to keep DFS informed, no later than at the time of their next quarterly filing, of all coins to be used or offered in connection with their Virtual Currency Business Activities.
Proposed Model Framework for the Creation of Company Coin-Listing Policies
A VC licensee’s coin-listing policy should consist of robust procedures that comprehensively address all steps involved in the review and approval of virtual currencies in connection with the Virtual Currency Business Activities of the licensee. The policy must be tailored to the VC licensee’s specific business model, operations, customers and counterparties, geographies of operations, service providers, and the use, purpose and specific features of the coins being considered. It should also include procedures for notifying DFS of new coin listings. A company coin-listing policy should, at a minimum, contain and be based on the following attributes:
I. Governance
The VC licensee should ensure that:
II. Risk
Before adopting or listing any new coin, a VC licensee should conduct and document a full risk assessment of such coin in a way that is entirely free of conflicts of interest, including the following risks:
VC licensees should ensure that an independent audit review of all associated risks relating to a new coin is conducted to ensure that all risks have been assessed and addressed.
III. Monitoring
After a new coin is adopted or listed, the VC licensee should have policies and procedures in place to monitor the newly adopted or listed coin, to ensure that the licensee’s continued adoption or listing of the coin remains prudent. This includes:
This model framework is not intended to be exhaustive, and may be updated from time to time in response to new information, evolving markets, and additional experience. Additionally, the model framework is not intended to limit the scope or applicability of any law or regulation. While we believe that well-crafted coin-listing policies will help avoid the potential adoption or listing of coins that are inconsistent with DFS regulations, DFS retains the right to object to the adoption or listing of any self-certified coin before or after the listing goes into effect, and to require that they be delisted.
1 Coins currently contemplated for the list include Bitcoin, Bitcoin Cash, Ether, Ether Classic, Litecoin, Ripple, Paxos Standard, and Gemini Dollar.