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New York regulators today released crypto rules for banks following the collapse of digital asset exchange FTX. The New York State Department of Financial Services (NYDFS) said Thursday that banks in the state must submit a business plan at least 90 days to the body before they get involved with cryptocurrencies.
The DFS will then review a bank’s proposal by assessing risk management, corporate governance and oversight, consumer protection, financials, and legal and regulatory analysis, the NYDFS said.
According to the NYDFS, the idea is to make sure “consumers’ hard-earned money is protected.”
“It is critical that regulators communicate in a timely, transparent manner about the evolution of our regulatory approach,” NYDFS Superintendent Adrienne A. Harris said in a statement.
The regulation comes in the wake of crypto exchange FTX’s spectacular collapse last month. The once very popular digital asset exchange was allegedly badly managed and commingled customers’ funds with its sister trading firm Alameda Research—which was unsustainable and led to its collapse.
Billions of dollars-worth of customers’ investments has seemingly gone up in smoke since the bankruptcy, prompting U.S. regulators to think harder about regulating the still nascent industry.
Democrat senators Elizabeth Warren of Massachusetts and Tina Smith of Minnesota last week penned a letter pressing Federal Reserve Chairman Jerome Powell for information on American banks’ ties to crypto following the collapse of FTX.
The two politicians—who are known for their criticism of crypto in general—also wrote to wrote letters to Federal Deposit Insurance Corporation Acting Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu raising concerns that “crypto firms may have closer ties to the banking system than previously understood.”
This is because Alameda Research plugged $11.5 million in Washington bank Moonstone and lawmakers claim other U.S. bank’s are suffering from “heightened volatility” due to crypto connections.
FTX’s ex-CEO and founder Sam Bankman-Fried was arrested in The Bahamas Monday after U.S. authorities requested his extradition from FTX’s home country. He is now in custody having been denied bail and faces eight criminal charges—including wire fraud.