The New York State Department of Financial Services (DFS) has submitted a proposed change in state laws that would allow it to charge licensed crypto companies for regulating them.
While that may seem like an odd proposition, under Financial Services Law (FSL) it is common practice for the DFS to charge licensed non-crypto financial entities for the cost and expenses of maintaining oversight over them.
The proposal is led by DFS Superintendent Adrienne Harris, who announced the move via the DFS website on Dec. 1 and has submitted it for public feedback over the following 10 days.
Essentially, Harris is looking to bring virtual currency businesses in line with other regulated financial entities in the state, as FSL did not have a provision for crypto companies when crypto regulation was adopted in New York in 2015.
Harris also outlines that these “regulations will allow the Department to continue adding top talent to its virtual currency regulatory team.”
“Through licensing, supervision and enforcement, we hold companies to the highest standards in the world,” Harris said, adding that “the ability to collect supervisory costs will help the Department continue protecting consumers and ensuring the safety and soundness of this industry.”
According to the proposal document, the DFS would charge firms based on the total operating expenses of overseeing licensees, and the “proportion deemed just and reasonable” for other operating and overhead expenses.
As such, there isn’t a set figure that all companies pay as their amount of oversight differs, however, the total amount owing would be broken down into five payment periods over the fiscal year.
With the crypto sector witnessing yet another multi-billion implosion, this time as the result of now-bankrupt FTX, Alameda Research and former golden boy Sam Bankman-Fried, it is unsurprising that regulators are scrambling to impose extra regulatory oversight.
In a U.S. Senate committee hearing on the FTX debacle on Dec. 1, Commodity Futures Trading Commission (CFTC) chair Rostin Behnam stated that while he feels his agency has the tools to oversee crypto, there are gaps in legislation that need filling.
“Without new authority for the CFTC, there will remain gaps in a federal regulatory framework, even if other regulators act within their existing authority,” he said.