New York financial watchdog proposes strengthened crypto guidelines

New York’s top financial watchdog proposed bolstering its oversight of crypto firms looking to list coins in the state.

The New York Department of Financial Services published proposed guidance on Monday aimed to strengthen how those firms list or delist coins, as well as guidance on adding coins to the state’s "greenlist."

"Since joining DFS, I have made it a priority to ensure the Department's regulatory and operational capabilities keep pace with industry developments to protect consumers and markets," NYDFS Superintendent Adrienne Harris said in a statement on Monday.

NYDFS has been active in regulating crypto in the state for years, having launched its BitLicense regime in 2015. A slew of firms have virtual currency licenses in the state including Coinbase, Inc., Circle Internet Financial, LLC. and Robinhood Crypto, according to its site, although some firms closed up shop in the state. 

Proposed changes

On Monday, NYDFS proposed requiring crypto firms to have certain standards on how they assess risk, including fraud, price manipulation and whether there is enough liquidity to meet customer demand. 

The proposal also requires firms to develop and submit a coin-delisting policy, the regulator said.

"In the event a listed coin is identified as presenting newly elevated risk, whether through a VC Entity’s monitoring process, a Department-identified weakness or vulnerability, or otherwise, VC Entities must be able to discontinue support of that coin in a manner that is consistent with safety and soundness and with protection of customers and the general public," the NYDFS said. 

A crypto firm would not be able to self-certify any coins until the regulator gave it written approval of its coin-listing policy, under the proposed guidelines. 

Comments on the proposed guidelines are due Oct. 20.