New York Financial Regulator Adopts Assessment Rule for Crypto Companies – Here's What You Need to Know
The New York State Department of Financial Services has passed a new law that requires companies holding a BitLicense to pay assessment fees similar to insurance and banking firms.
The regulation will give the NYSDFS new authority to “collect supervisory costs from licensed virtual currency businesses” under a provision in New York’s fiscal year 2023 budget, according to a Monday press release.
The new legislation puts digital asset firms in the same row as insurance and banking companies, which pay assessment fees that fund the agency’s operations.
The New York regulator initially proposed the assessment charges in December last year, claiming that they help bring in additional resources that would allow the agency to hire more staff and expand its virtual currency unit.
Adrienne Harris, who leads the New York State Department of Financial Services as its Superintendent, also shared the same point of view, arguing that the new rule helps the future developments in virtual currency.
“This regulation provides the Department with additional tools and resources to regulate the virtual currency industry now and in the future as innovators create new products and use cases for digital assets."
On its website, the NYSDFS detailed that crypto firms will be billed five times in the fiscal year 2023-2024 with four quarterly assessments throughout the year “based on the Virtual Currency Unit’s estimated annual budget at the time of the billing.”
There will also be a final assessment at the end of the year based on the unit’s actual expenses.
The agency said it will require crypto firms to “meet rigorous standards for capitalization, cybersecurity protection, and anti-money laundering protocols, among other requirements.”
Assessment Fees Will Depend on the Size of Crypto Firms
Harris revealed that the assessment fees would depend on a crypto firm’s size and complexity, she reportedly said at the Links NYC conference hosted by blockchain analytics firm Chainalysis earlier this month.
The assessment, she said, will ultimately “go a long way toward helping the space grow and helping make sure it grows safely.”
The NYDFS has increased its digital asset unit staffing over the past year, Harris said, adding that the crypto unit now employs more than 50 people.
The latest legislation is one in a series of crypto-related directives NYDFS has issued in the past year.
Earlier this year, the regulator released new guidance that mandates companies to separate their own crypto assets from that of customers.
The move came after it was revealed that there was co-mingling of funds between the now-bankrupt cryptocurrency exchange FTX and its trading arm Alameda Research.
New York is among the few states that require businesses that engage in the transmission of fiat currency as well as a virtual currency to have both a BitLicense and a traditional money transmitter license.
The state also requires firms to undergo examinations to ensure they are in line with requirements and comply with know-your-customer, anti-money laundering rules.