NYDFS proposes charging crypto businesses for supervision


Dive assignment:

  • New York’s Department of Financial Services (NYDFS) proposed a measure Thursday that would allow the agency to bill state-licensed crypto businesses for costs related to oversight and examinations.
  • The fees, which stem from a provision in the state’s fiscal 2023 budget, will help the agency “continue to add top talent to its virtual currency regulatory team,” the department said in a press release.
  • Existing rules already allow the agency to charge non-crypto financial institutions licensed in the state for such expenses.

Dive Insight:

NYDFS will comment for 60 days after the proposed measure is published in the State Register. A 10-day pre-proposal comment period began Thursday, the agency said.

NYDFS touted itself as an early leader in virtual currency regulation on Thursday, saying it established the nation’s first leadership in the sector in 2015.

“As the virtual currency industry evolves, DFS is leading the way, and will remain committed to keeping New York the model for robust, forward-looking regulation,” the agency said in its press release. “Today’s action helps advance this important work.”

The proposal came on a day when the regulation of crypto firms at the federal level has gained a spotlight. On Thursday, the Senate Agriculture Committee heard testimony from the Commodity Futures Trading Commission (CFTC), chairman, Rostin Behnam, about how this agency views oversight of the sector.

Two senators on the committee, Debbie Stabenow, D-MI, and John Boozman, R-AR, introduced a bill in August that would define a new asset class — digital commodities — and let the CFTC oversee the trading of tokens, including Bitcoin and Ether, that meet that standard.

Sens. Kirsten Gillibrand, D-NY, and Cynthia Lummis, R-WY, meanwhile, unveiled a bill in June that sought to clarify which digital assets would be commodities versus securities.

That question has permeated numerous discussions about how to police crypto. Over the past year, the Securities and Exchange Commission (SEC) has relied on the 1946 Howey test to define certain crypto products as securities and has come under fire from industry leaders like Coinbase, who have accused the agency of regulation through enforcement.

The crypto field since July has seen several high-profile bankruptcies, including at FTX, BlockFi, Voyager and Celsius.

During the New York Times’ DealBook Summit on Wednesday, former FTX CEO Sam Bankman-Fried said he spent “hundreds, even thousands, of hours meeting with regulators,” indicating that a government measure targeting crypto firms for supervision, can be relatively profitable. prospect at a time when regulation is first developed.

“The ability to collect surveillance costs will help the department continue to protect consumers and ensure the safety and soundness of this industry,” NYDFS Superintendent Adrienne Harris said in a statement Thursday.