New York Regulator to Require Higher Standards for Coin Listings and Delistings

New York’s financial regulator wants cryptocurrency companies regulated in the state to be more transparent about how they list and delist crypto coins.

Mengqi Sun( with inputs from The Wall Street Journal)
Published18 Sep 2023, 11:25 PM IST
Adrienne Harris, the superintendent of the New York State Department of Financial Services, says the proposed guidance was needed to make standards around coin offerings more robust.
Adrienne Harris, the superintendent of the New York State Department of Financial Services, says the proposed guidance was needed to make standards around coin offerings more robust.

New York’s financial regulator wants cryptocurrency companies regulated in the state to be more transparent about how they list and delist crypto coins.

The New York State Department of Financial Services, in proposed guidance to be published Monday, spells out its expectations for how crypto firms evaluate a coin offering before adoption, based on a prior version of the framework. The regulator also describes its expectations of the steps and criteria a crypto firm must consider before delisting a coin.

The proposed framework is meant to guide firms on how to draft firm-specific coin listing and delisting policies.

NYDFS Superintendent Adrienne Harris said the guidance was needed to make standards around coin offerings more robust, and that the updates came from deficiencies found through examinations. She also said the new guidance will be the first one about delisting.

“When we know that a coin that someone once thought was OK, when we see that new risks have emerged or the coin is being misused, we want our entities to have a way to delist the coin in a way that’s still protective of consumers and protects safety and soundness as well,” she said.

As part of the proposal, the NYDFS is asking virtual currency companies registered in the state to submit new coin-listing and delisting policies. The proposed legislation is open for public comment until Oct. 20.

An original framework guidance issued in 2020 asked crypto companies regulated by NYDFS to submit a firm-specific coin listing policy and to seek the regulator’s approval before listing or offering custody for a coin, unless the coin is on a so-called “greenlist” of coins already approved by the regulator. The listing policy must be tailored to a company’s business model, operations and customers, among other things.

After receiving approval for its coin-listing policy from the regulator, a firm can self-certify a listing—attesting a coin meets the firm’s standards without seeking approval from NYDFS. But the firm must still provide written notice to NYDFS before using a coin and must keep the regulator informed of all coins it offers or uses.

The new framework asks crypto firms to draft their coin-listing policy in three areas: governance for the coin-listing process; risk assessments of coins; and procedures to monitor coins.

The proposed delisting framework asks firms to detail how they decide to delist a coin, including the type of events that could prompt a removal, and execution plans, such as giving customers advance notice and drawing up an impact analysis.

The proposed frameworks come as Harris marks two years on the job as New York’s top financial regulator. NYDFS has been looking to use the state’s standing as a leader in regulating the insurance and banking sectors to help set the regulatory agenda nationwide for crypto.

Under her leadership, NYDFS has levied $132 million in fines against crypto companies, including exchange Coinbase and online trading platform Robinhood’s crypto unit.

The agency also oversaw the closure of Signature Bank in March amid turmoil in the crypto market. Signature Bank had about $4 billion of deposits related to its digital assets banking business, according to a March 20 statement from the Federal Deposit Insurance Corp.

“We’re continuing to supervise the risk-based analysis of our entities, make sure those examinations are going well, make sure the entities are remediating in a timely manner. We will, of course, continue to bring enforcement actions where necessary,” Harris said.

She noted her agency’s crypto unit now has about 60 staff, almost tripling its size from two years ago.

Write to Mengqi Sun at mengqi.sun@wsj.com

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First Published:18 Sep 2023, 11:25 PM IST
Business NewsEconomyNew York Regulator to Require Higher Standards for Coin Listings and Delistings

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