New York’s Department of Financial Services, or NYDFS, has issued guidelines for how licensed crypto firms should handle customer assets if they face “bankruptcy or similar proceedings.”
In a Jan. 23 announcement, NYDFS Superintendent Adrienne Harris he said crypto firms and exchanges operating under a BitLicense – required in New York State – should separate company funds from users’ virtual currency holdings both on-chain and in the company’s custodian’s “internal ledger accounts”. According to the regulator, crypto firms are expected to hold users’ assets “solely for the limited purpose of performing custody and safekeeping services”:
“AND [virtual currency entity’s] the customer agreement should make clear the parties’ intentions to enter into a custodial relationship rather than a debtor-creditor relationship.’
In addition to these guidelines, the NYDFS added that all licensed asset management firms should “maintain appropriate books and records” as well as disclose information related to its products and services on terms available to customers. Harris said the guidelines were aimed at “the safety of customer property”.
#ICYMI: Superintendent Adrienne A. Harris issued Regulatory Guidance to better protect customers in insolvency or similar proceedings. Read more here: https://t.co/Nstz39M9Wo pic.twitter.com/FJ0fbrJBxH
— NYDFS (@NYDFS) January 23, 2023
The announcement followed several crypto exchanges based in the United States filing for Chapter 11 bankruptcy protection following some reported liquidity issues including FTX, BlockFi, Voyager Digital and Genesis. Many former customers of crypto firms were not completely settled during the bankruptcy proceedings.
Related: New York proposes to charge crypto firms to regulate them
Harris he said during a speech in November 2022 that federal-level lawmakers should consider “nationally a framework that looks like what New York has” when it comes to crypto regulation, referring to the state’s BitLicense regime. NYDFS earlier too issued regulatory guidelines for USD-backed stablecoins.
