The New York Department of Financial Services, or NYDFS, has published guidelines on how licensed cryptocurrency businesses should handle client assets in the event they face “insolvency or similar proceedings.”
In a January 23 announcement, NYDFS Superintendent Adrienne Harris said that crypto companies and exchanges that operate under a BitLicense — required in New York state — must segregate corporate funds from users’ virtual currency holdings both on-chain and online. the “internal ledger accounts” of the company custodian. According to the regulator, crypto companies are expected to hold user assets “only for the limited purpose of carrying out custody and safeguard services”:
“The customer agreement [de una entidad de moneda virtual] must make clear the intentions of the parties to enter into a custodial relationship, rather than a debtor-creditor relationship.”
In addition to these guidelines, the NYDFS added that all licensed custodians must “maintain proper books and records” as well as disclose information related to their products and services on terms and conditions available to clients. Harris said the guidelines were aimed at “custody of client assets.”
#ICYMI: Superintendent Adrienne A. Harris released Regulatory Guidance to better protect customers in the event of an insolvency or similar proceeding. Read more here: https://t.co/Nstz39M9Wo pic.twitter.com/FJ0fbrJBxH
— NYDFS (@NYDFS) January 23, 2023
The announcement came after several United States-based cryptocurrency exchanges filed for Chapter 11 bankruptcy protection following some liquidity problems, including FTX, BlockFi, Voyager Digital, and Genesis. Many former clients of cryptocurrency firms have not recovered amid bankruptcy proceedings.
Harris said during a speech in November 2022 that lawmakers at the federal level should consider a “national-level framework that resembles what New York has” in terms of crypto regulation, referring to the state’s BitLicense regime.. The NYDFS has also previously published regulatory guidance for US dollar-backed stablecoins.
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