Five years after the New York Department of Financial Services (DFS) issued its virtual currency regulation (23 NYCRR Part 200), it has granted 25 virtual currency licenses and charters. In that time, since DFS began authorizing BitLicensees and virtual currency trust companies (collectively, “VC Entities”), some of these businesses have asked to list new virtual currencies (“coins”) in addition to those included in their initial DFS applications.
That that end, DFS issued a proposed guidance to enhance efficiency and enable VC Entities to offer and use new coins in a timely and prudent manner. It offered the following two proposed coin adoption or listing options that DFS wanted to make available to the VC Entities:
- A proposed DFS webpage, to be updated from time to time, that would contain a list of all coins permitted for VC Entities’ Virtual Currency Business Activity, without DFS’ prior approval, as long as such listed coins had not been subject to any material modification, division, or change after their listing on the DFS webpage (the “Greenlist”)
- A proposed model framework for the creation by a VC Entity of a coin-listing or adoption policy tailored to the VC Entity’s specific business model and risk profile (a “coin-listing policy”) that would enable the VC Entity to self-certify the listing or adoption of new coins in addition to those on the Greenlist, without any further approval from DFS
After reviewing feedback from various stakeholders—including the regulatory community, VC Entities and other virtual currency firms, attorneys and foundations—DFS revised the proposed guidance to provide a general framework for a VC Entity’s creation of a firm-specific policy for the adoption or listing of a new coin, without DFS’s prior approval, through the process of self-certification, and to include a general framework for the process of Greenlisting coins for wider usage
The updated guidance is intended to outline two separate frameworks designed to enhance speed and efficiency in a VC Entity’s adoption or listing of coins, with the goal of fostering innovation.
General Framework for the Creation of a VC Entity’s Coin-Listing Policy
A VC Entity that wishes to self-certify the use of new coins, in addition to those on the Greenlist, without the prior approval of DFS, must create a coin-listing policy in accordance with the following general framework.
A VC Entity’s coin-listing policy must include robust procedures that comprehensively address all steps involved in the review and approval of coins. The policy must a;sp be tailored to the VC Entity’s specific business model, operations, customers and counterparties, geographies of operations, and service providers; and to the use, purpose, and specific features of coins being considered.
The policy should result in approval of a coin only if the VC Entity concludes that the coin’s intended use or adoption is consistent with the consumer protection and other standards embodied in 23 NYCRR Part 200 and with the safety and soundness of the VC Entity.
General Framework for Greenlisting Coins
DFS will maintain a record of all coins approved for VC Entities, whether directly by DFS or through the self-certification process, including their approved use. If a coin has received such approval for a specific use by three different and unrelated VC Entities, DFS will prepare to add that coin for that specific use to the Greenlist.
After Step 1 (above) is complete, DFS will announce this on its website. DFS will also note that there will be a six-month waiting period (the “Greenlist Waiting Period”) from the date of such announcement until such time that other VC Entities that have not previously received approval can use the coin (subject to all regulatory, internal approval, and safety and soundness requirements).
During the Greenlist Waiting Period, any VC Entity may still seek to use the coin either through direct DFS approval or through the self-certification process. In addition, DFS may, in its discretion, add to the Greenlist coins that have been specifically reviewed and approved by DFS for creation and issuance by a VC Entity privately and in a centralized manner.
For the full guidance, visit www.dfs.ny.gov.