Banks must seek and obtain prior approval before engaging in cryptocurrency-related activities, and those that already engage in such activities must immediately notify the agency, the New York Department of Financial Services said.
(Bloomberg) — Banks must seek and obtain prior approval before engaging in cryptocurrency-related activities, and those that already engage in such activities must immediately notify the agency, the New York Department of Financial Services said.
For banks already active in crypto, the department will seek further information and impose requirements as needed, it said in a statement Thursday. The guidance also applies to banks that use a third party to conduct any crypto-related business. As part of its review, the NY regulator said it would assess several areas, including the banks’ business plan, risk management, corporate governance and consumer protection.
“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,” Superintendent Adrienne Harris said in the statement.
Banks with crypto-related business or partnerships with digital-asset firms have drawn greater scrutiny following the collapse of FTX. After the firm went bankrupt it was revealed that the crypto exchange and its sister company Alameda Research had ties to a number of banks, including some regulated in the US.
Federal banking regulators, including the US Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., have issued guidance similar to the New York DFS requiring banks they oversee to notify them and obtain approval before partaking in crypto activities. Democratic Senators Elizabeth Warren and Tina Smith recently asked the heads of the OCC, Fed and FDIC to conduct a broad review of crypto firms’ ties to the banking industry following FTX’s unraveling.
“We write to express concern regarding recent revelations of ties between the banking industry and cryptocurrency firms,” the US senators said in the letters sent earlier this month.
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