New York state releases crypto guidelines
Companies must provide the state department with detailed submissions of any fraudulent activities.
The New York State Department of Financial Services (DFS) has released new guidelines for all digital currency entities licensed by New York State to assist in preventing, detecting, avoiding and responding to fraud.
DFS superintendent Maria T. Vullo said that crypto companies must take steps to guard against fraudulent and manipulative activity to ensure that the market evolves under the guise of “strong regulatory supervision”.
The guidance is to be implemented by all virtual currency businesses in the state, including those that hold a New York money transmitter license.
“DFS took the lead in 2015 in regulating the virtual currency market, and we continue to be vigilant concerning risks in these markets,” Vullo said. “Market manipulation presents serious risks, both to consumers and to the safety and soundness of financial services institutions.”
As part of the new guidelines, crypto companies are expected to identify and assess the full range of fraud-related and similar risk areas, including, as applicable, market manipulation. Businesses must also provide effective procedures and controls to protect against identified risks and allocate monitoring responsibilities.
Effective investigations of fraud and other wrongdoings are also required, along with detailed submissions to the DFS regarding any fraudulent activities that have been discovered and reports of material developments. This includes a statement of the actions taken or proposed to be taken with respect to such developments and
a statement of changes, if any, in the entity’s operations in order to avoid repetition of similar events.
New York’s DFS has approved virtual currency licenses for bitFlyer USA, Coinbase Inc., XRP II and Circle Internet Financial, plus digital charters for Gemini Trust Company and itBit Trust Company.
Across the country, governments, regulators and businesses are reacting to the explosion of cryptocurrencies in a variety of ways. Courier delivery service FedEx recently revealed plans to integrate blockchain technology and develop new industry standards for transportation companies. Digital exchange Coinbase has distributed end of year tax documents, via email, to U.S. customers to assist with voluntary compliance.
A Senate Committee met in open session earlier this week for a hearing to discuss U.S. regulators’ roles in monitoring and policing the fast-growing crypto industry, highlighting the potential for systemic effects. Additionally, the Securities and Exchange Commission’s (SEC) compliance department highlighted the need to carefully monitor risks associated with initial coin offerings (ICOs) in 2018 as part of its annual list of priorities.
Overseas, China is blocking offshore crypto platforms to protect against illicit issuance and fraud, while South Korea attempts to outlaw anonymous trading but says it has “no intention” of banning cryptocurrency trading.
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