New York Crypto Regulations May Soon Become More Strict

Uwagwu Bennett
Uwagwu Bennett Published on September 19, 2023 03:16 AM

In the most recent update, a New York crypto regulator eliminated Ripple and Dogecoin from the list of approved tokens.

New York Crypto Regulations May Soon Become More Strict
Source: Pexels

The New York Department of Financial Services announced an update to its regulatory framework for virtual currencies on Monday. This included new standards for how digital enterprises with agency licenses can list various cryptocurrencies. Ripple, Dogecoin, and Litecoin were among the tokens that DFS removed from its "greenlist" of permitted tokens as part of the redesign. Eight tokens, including Bitcoin, Ether, and the newest PayPal Dollar, are still on the list.

Department of Financial Services And The Token Greenlist

Thanks to its BitLicense program and virtual currency unit, DFS has established itself as a nation-leading digital asset supervisor as Congress continues to put off regulating cryptocurrencies. 

The agency is regularly criticized by the cryptocurrency business for its rigorous licensing procedure, but the new guidelines show that DFS takes a methodical approach to regulating the market, while other state and federal agencies prefer to use enforcement measures.

The token greenlist was developed by DFS as part of its broader crypto oversight. A self-certification mechanism allowed enterprises licensed by DFS through its virtual currency program to obtain authorization to custody and sell tokens, streamlining the procedure while retaining the department's supervisory role because the firms were still required to notify DFS.

A token would be approved for custody or listing by any DFS-licensed firm once it has been self-certified by two firms for either custody or listing. This would speed up the process and make it easier for anyone to use the approved tokens.

25 tokens were reportedly previously approved for custody, listing, or both on the "greenlist," with well-known names like Bitcoin, Dogecoin, Ethereum, Litecoin, Ripple, and the new PayPal Dollar among them.

DFS indicated it would update its greenlist, which now only includes eight tokens, as part of its revised guidelines. The BitLicense grantee Circle's USDC, the second-largest stablecoin by market cap, did not show up on either the old or new iterations of the greenlist.

Since the stablecoin was not on the original list either, it is unclear why this decision has been upheld so vehemently.

The coin may come under investigation from the NYDFS if the agency has not given it the go-ahead to be listed on cryptocurrency exchanges. This was a problem with XRP in the past when the Securities and Exchange Commission (SEC) first sued Ripple. As a result, numerous exchanges delisted XRP, which was later reinstated after Ripple partially prevailed.

Given the state of the market at the moment, another delisting would have a slightly more negative effect on the price.

"The list of greenlisted coins has been updated to follow the new general framework for greenlisted coins," a DFS spokesperson 

The new advice will "clarify" the department's expectations for coin-listing and delisting policies of DFS-regulated organizations, according to a news statement issued by DFS on Monday. In addition to revising the greenlist, DFS stated that it would move away from the existing self-certification system and increase criteria for retail customer-facing enterprises and risk assessment standards for coin-listing procedures. Additionally, licensees are now required to implement a token-delisting strategy that enables businesses to discontinue support for tokens while lessening the negative effects on users.

The department has exercised stringent monitoring during the bear market in cryptocurrencies under Superintendent Adrienne Harris.

In January 2023, DFS announced its first fines against cryptocurrency firms, including a $100 million agreement with Coinbase for shortcomings in its compliance program. DFS ordered the cryptocurrency company Paxos to stop issuing BUSD, a popular stablecoin that it released in collaboration with Binance, in February.

Despite other authorities like the Securities and Exchange Commission being unwilling to engage in rule-making for the volatile sector, DFS has still gained the grudging respect of many in the U.S. crypto industry. The latest greenlist illustrates a recurring conundrum for cryptocurrency businesses, particularly exchanges, as they choose which coins to incorporate in the face of regulatory uncertainty.

Crypto Licensing In New York

One of the strictest crypto licensing regimes is in place in New York; some claim it has stifled the expansion of the industry there, while others claim it may have avoided big disasters like FTX.

On the basis of the agency's previously supplied framework, the state released new instructions and procedures on Monday that explain how cryptocurrency enterprises are supposed to examine coin listings before they are adopted.

Given the flurry of enforcement proceedings that call for token delistings, it appears like NYDFS intends to establish a more organized mechanism for those operations to take place.

In addition to other platforms covered by the BitLicense, the new suggested guidance would also apply to state-regulated platforms for cryptocurrencies such as Coinbase, eToro NY, Robinhood Crypto, and SoFi Digital Assets.

Licensees are required to submit a de-listing policy by January 31, 2024. Following the comment period, DFS will consider all feedback and give final guidance.

Whether the new regulations will make it possible for crypto companies to do business in the state or if they will make supporters of the sector even less inclined to open offices.




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