Regulators in New York Taking Aim at Crypto Firms That Mishandle Customer Funds: Report

The New York state financial regulator is preparing to release new guidelines aimed at preventing another co-mingling crypto collapse like FTX.

According to a new report from Reuters, the New York State Department of Financial Services (NYDFS) is releasing regulations today that will ensure that crypto companies will keep customers’ digital assets separate from their own.

The guidelines will also inform crypto firms how they must disclose to customers their accounting methods for clientele digital assets. It is the latest in a series of new regulations announced by NYDFS over the last year.

In December 2022, the state regulator published new rules for banks planning to submit proposals to venture into crypto.

Under the guidance released last month, New York-regulated banking organizations and NYDFS-licensed foreign banking organizations were informed they must submit a business plan 90 days before engaging in crypto activities and provided the types of information that the department will take into account when assessing proposals.

Says Adrienne Harris, the superintendent of NYDFS, of the upcoming new guidelines,

“It’s timely, but truth be told, it was something we had on our policy roadmap even before FTX…”

Harris, a former senior advisor at the U.S. Treasury Department, goes on to say,

“While I would never be foolhardy enough to say that no New Yorker will be harmed in all of this, I think it’s very fair to say that New Yorkers are better off than anybody else in the country because of the framework we have.”

The new guidance comes on the heels of the much-publicized FTX collapse in late 2022. It also follows crypto lender Genesis’s Chapter 11 bankruptcy filing, which has affected Gemini Earn users.

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