New York State regulators will tighten standards for listing and delisting cryptocurrencies.
New procedures are prescribed for cryptocurrency companies when evaluating digital assets before their inclusion and exclusion from a platform.
The New York State Department of Financial Services (NYDFS) intends to require cryptocurrency companies to follow stricter standards when including and excluding digital assets, The Wall Street Journal (WSJ) reports.
According to the publication, the regulator intends to publish draft guidelines as early as Sept. 18 that will set a framework for how cryptocurrency companies should evaluate cryptocurrencies before including and excluding them. The new framework is intended to help each company develop its own rules for including and excluding coins. The document will be open for public discussion until October 20.
The proposed recommendations are necessary to tighten and increase transparency in cryptocurrency standards, NYDFS head Adrienne Harris said. The recommendations were developed in response to identified weaknesses in audits, she said.
The original recommendations, published in 2020, required cryptocurrency companies to submit their own coin inclusion rules and get regulator approval before including a coin or providing coin storage services unless the asset was included in the so-called "green list" of coins already approved by the regulator.
Once it has received the regulator's approval for its inclusion policy, the company can include the coin on its own without seeking approval from the NYDFS but must notify the regulator in writing. It must also inform it of all coins it offers or uses. There were no standards for excluding a coin.
"When we learn that there are new risks associated with a coin that someone once thought was safe or the coin is being abused, we want our organizations to have a way to exclude it in a way that not only protects consumers but also ensures safety and soundness," Harris said.
The proposed new system suggests cryptocurrency companies develop coin inclusion policies in three areas: inclusion management, risk assessment, and asset monitoring procedures, the publication said.
The proposed exclusion system would require companies to detail how they decide to exclude a coin, including the reasons for exclusion, as well as action plans such as customer pre-notification and impact analysis.
According to the WSJ, Harris has been New York's top financial regulator for two years. During that time, the number of employees in the agency's cryptocurrency division has nearly tripled to 60. Under her leadership, the NYDFS has levied more than $130 million in fines against cryptocurrency companies, including exchange Coinbase and platform Robinhood.
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