New York Cryptocurrency Laws
Article 13-B of the Banking Law (Sections 640 to 652-b)
“Money Transmitter” Definition
Note* New York State Department of Financial Services Title 23, Chapter 1, Part 200 has comprehensive regulations of virtual currencies found outside of New York’s banking law.
“Payment instrument” means any check, draft, money order, or other instrument or order for the transmission or payment of money, whether or not such instrument or order is negotiable, and sold to one or more persons. “Payment instrument” does not include a traveler’s check, any instrument which is redeemable by the issuer in merchandise or services, a letter of credit or a permissible investment as defined in this section. “Agent” means any person designated or appointed by the licensee pursuant to a written agency contract to engage in money transmission activities at locations other than a duly authorized office of the licensee as provided in section six hundred forty-eight of this article. Except for a licensee, any person acting as agent engaging in money transmission activities absent such a written agency contract shall be deemed to be in violation of section six hundred forty-one of this article and may be subject to criminal prosecution pursuant to section six hundred fifty of this article. Such term shall not be deemed to include any banking corporation incorporated or licensed under this chapter or under the laws of the United States or any other state or any casher of checks licensed under this chapter. Section 640
No person shall engage in the business of selling or issuing checks, or engage in the business of receiving money for transmission or transmitting the same, without a license therefor obtained from the superintendent as provided in this article, nor shall any person engage in such business as an agent, except as an agent of a licensee or as agent of a payee; provided, however, that nothing in this article shall apply to a bank, trust company, private banker, foreign banking corporation licensed pursuant to article two of this chapter or foreign banking company authorized to operate pursuant to the International Banking Act of 1978 (12 USC 3101 et seq.), as amended, savings bank, savings and loan association, an investment company, a national banking association, federal reserve bank, corporation organized under the provisions of section twenty-five-a of an act of congress entitled the “Federal Reserve Act”, federal savings bank, federal savings and loan association or state or federal credit union. Section 641
$3,000 Application Fee
Bond and Insurance Requirements
As a condition for the issuance and retention of the license, applicants for a license and other licensees shall, within thirty days after notice by the superintendent, or such longer or shorter period as he or she shall prescribe, file with the superintendent one or more corporate surety bond or bonds, as required below, in form satisfactory to him or her and issued by a bonding company or insurance company authorized to do business in this state. One bond shall be in favor of the superintendent and in such principal amount as he or she shall determine is necessary or desirable for the protection of the purchasers and holders of New York instruments sold or to be sold by the applicant or licensee, provided, however, that until June first, nineteen hundred seventy-seven, the principal amount of such bond shall be no less than two hundred ten thousand dollars and on and after June first, nineteen hundred seventy-seven, the principal amount of such bond shall be no less than five hundred thousand dollars. If the applicant or licensee intends to engage or engages in the sale of New York traveler’s checks, such applicant or licensee shall file with the superintendent a separate bond. Said bond shall be in favor of the superintendent and in such principal amount as he or she shall determine is necessary or desirable for the protection of the purchasers and holders of the New York traveler’s checks sold or to be sold by the applicant or licensee; provided, however, that the principal amount of such bond shall not be less than seven hundred fifty thousand dollars, unless the superintendent, for good cause shown, shall have determined that a lesser amount will adequately protect the purchasers and holders of the New York traveler’s checks sold or to be sold by such applicant or licensee. Section 643
Bond Alternatives and Additional Insurance Requirements
In lieu of such corporate surety bond or bonds, or of any portion of the principal sum thereof as required by this section, applicants for a license and other licensees may keep on deposit, or may be required to keep on deposit by the superintendent, with such banks, trust companies, national banks, savings bank, savings and loan associations, federal savings associations, credit unions, or federal credit unions in the state of New York as such applicants or licensees may designate and the superintendent may approve, and in accordance with such rules and regulations as the superintendent shall from time to time promulgate, interest-bearing stocks and bonds, notes, debentures or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of this state, or of a city, county, town, village, school district or instrumentality of this state, or guaranteed by this state, or dollar deposits, to an aggregate amount, based upon principal amount or market value, whichever is lower, in the case of the above-described securities, of not less than the amount of the required corporate surety bond or bonds or portion or portions thereof. Such securities or funds shall be deposited to secure the same obligation or obligations as would the corporate surety bond or bonds filed under this section. So long as it shall continue business in the ordinary course, such licensee shall be permitted to collect interest on the securities so deposited and from time to time to exchange, examine and compare such securities. In the event of the failure or insolvency of such licensee, the securities, any proceeds therefrom and the funds deposited pursuant to this section shall constitute a trust fund for the exclusive benefit of the purchasers and holders of New York instruments or New York traveler’s checks, as the case may be, or, in the event such New York instruments are assigned to the fund, the securities, any proceeds therefrom and the funds deposited pursuant to this section for the benefit of the purchasers and holders of New York instruments shall constitute a trust fund, for the benefit of the fund. Section 643
Every licensee shall at all times maintain permissible investments having (i) a market value, computed in accordance with generally accepted accounting principles, at least equal to the aggregate of the amount of all its outstanding payment instruments and all its outstanding traveler’s checks or (ii) a net carrying value, computed in accordance with generally accepted accounting principles, at least equal to the aggregate of the amount of all its outstanding payment instruments and all its outstanding traveler’s checks so long as the market value of such permissible investments is at least eighty per centum of the net carrying value. Notwithstanding the foregoing provisions of this section, the superintendent shall have the authority, for good cause shown, to exempt from the requirements of this section any licensee. Section 651
Money Transmission License Required for Crypto Exchange?
Yes (would need a BitLicense)
State Comments or Statements
New York State Department of Financial Services released a comprehensive regulatory framework called “BitLicense” that requires operations related to transactions involving virtual currency to obtain a license from the state. New York statute regarding regulation of virtual currencies: https://www.dfs.ny.gov/legal/regulations/adoptions/dfsp200t.pdf