NYDFS tightens virtual currency regulations for VC firms!

The New York State Department of Financial Services (DFS) has updated its regulatory framework for virtual currency (VC) businesses, introducing strict measures that venture capital firms must adhere to when transacting with digital currencies. The move aims to improve governance and compliance in the sector.

On Monday, the DFS mandated that VC entities create initial strategies for handling coin transactions that comply with these enhanced standards, which include strict governance procedures and a robust compliance review process - Companies must conduct risk assessments that address a broad range of risks before self-approving coin listings. By Thursday, December 7, 2023, VC firms are expected to engage in discussions with the DFS on their draft delisting strategies.- Looking ahead, by Wednesday, January 31, 2024, VC entities are required to have their final delisting policies reviewed and approved by the DFS to ensure continued regulatory compliance.

In addition to these requirements, as of today, organizations such as Gemini and Robinhood are required to have DFS-approved procedures for cryptocurrency listings and delistings. These procedures must include security protocols and customer protection measures tailored to each organization's unique business model.

A comprehensive coin vetting process is required, taking into account the unique characteristics of each coin.

This update follows the Previous Guidance issued by the DFS on June 24, 2020, which outlined initial expectations for virtual currency businesses. Pending final approval of delisting policies, VC entities are limited to listing only a select few coins from the green list - this list has been reduced from over twenty coins to only eight, including Bitcoin. This restriction underscores the DFS's commitment to maintaining a safe and compliant virtual currency market in New York State.