The New York Department of Financial Services (NYDFS) has granted virtual currency approval to commercial banking transactions, authorizing a new system from Signature Bank which will allow corporate customers to make bank payments in a form of virtual currency.
Dubbed ‘Signet,’ the platform will allow the bank’s commercial customers to send transactions in tokens known as ‘Signets,’ allowing for free transactions sent directly at any time via the blockchain.
The approval is part of the department’s approach to fostering ‘regulated innovation,’ in providing greater flexibility for Fintech innovation and research.
DFS Superintendent Maria T. Vullo welcomed Signet, which she said would provide a low cost way for businesses to send payments.
“DFS is pleased to strengthen and foster regulated innovation in New York’s burgeoning financial technology sector, specifically within our state-chartered banking system,” Vullo said in a statement. “New York continues to support and help advance innovation through sound state regulation and with products such as Signet, which provide lower-cost ways for businesses to efficiently make payments.”
Joseph J. DePaolo, president and CEO at Signature Bank, said the support of the Department of Financial Services was crucial in helping them turn their digital vision into reality. He noted, “Through regulated innovation, we were able to turn our vision into a reality. It is clear the Superintendent and Department of Financial Services have thoroughly researched the financial technology arena and understand how it impacts the future of financial services. We look forward to working closely with their team to continue to transform digitally.”
Fintech innovation often runs into challenges with regulation, particularly around transactions that might typically require a degree of regulation and licensing beyond the grasp of most startups.
By giving the go-ahead to the Signet scheme as a virtual currency, the DFS has underlined its commitment to supporting emerging applications for cryptocurrency assets.
The approval comes following an extensive and robust assessment of Signature Bank’s application, and is attached to stringent compliance requirements.
Nevertheless, it demonstrates a proactive response from a regulator, at a time of increasing focus on blockchain developments of this kind.
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The New York State Department of Financial Services (DFS) has approved New York Digital Investment Group (NYDIG) Execution LLC, a subsidiary of NYDIG LLC, for a virtual currency license and a money transmission license. The virtual currency license, also known as BitLicense, is required by any party looking to engage in any virtual currency-related business activity in the state.
According to the announcement, the license will allow NYDIG Execution to offer secure custody and trade execution services. It will also enable the company to operate as a custodian for virtual currencies such as Bitcoin BCH, as well as BTC, ETH, XRP, and LTC.
Financial Services Superintendent Maria T. Vullo said the approval strengthens the fintech marketplace in New York. She added that having regulation for the crypto space would ensure growth for the market, increase innovation and fewer risks for participants.
The BitLicense regulations have received mixed reactions from operators since August 2015. Some companies embrace the laws while others left New York to look for a more accommodating environment. Business exited the state in what was termed as “the Great Bitcoin Exodus,” citing harsh regulations, excessive disclosure requirements, and financial disincentives.
In a statement, NYDIG CEO Robert Guttmann said the company looks forward “to providing secure and transparent liquidity, asset management and custodial services to the institutional market.”
DFS has continued to regulate the financial market by licensing technology-based money transmitters under New York’s money transmitter law. The authority has also monitored online lenders under New York’s banking law and virtual currency exchanges under New York’s financial services law. So far, DFS has approved fourteen charters or licenses for companies in the virtual currency marketplace.
In 2018, more licenses have been granted to business in the crypto space. This year alone, nine licenses have been awarded. The seventh one was recently awarded to ATM operator Coinsource only two weeks ago. NYDIG’s license comes eight months after a proposed alternative to BitLicense regulations was brought before the New York State Assembly.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
The world’s largest crypto ATM company Coinsource has become the latest firm to secure a coveted virtual currency license in New York, after winning the approval of regulators at the New York Department of Financial Services (NYDFS).
In securing the license—one of only nine to have been granted to date—Coinsource becomes the first company of its kind to have been awarded the license, which will enable them to provide a range of regulated services throughout the state.
In a statement, Coinsource CEO Sheffield Clark said that all New Yorkers were now eligible to buy and sell with confidence at Coinsource kiosks.
According to Clark, “Coinsource is the first and only company that operates Bitcoin Teller Machines (BTM) to receive a New York virtual currency license. All New Yorkers—from the people that are unbanked to the people who own the banks—can use our kiosks in their neighborhood retail locations to buy Bitcoin instantly in a convenient and familiar way.”
“Now that Coinsource is a license holder, our customers can buy and sell with confidence that Coinsource meets and exceeds the high standards set by the New York Department of Financial Services,” he noted. “New York represents not just a center of global innovation but also one of our largest target markets. We are extremely proud to be the only Bitcoin ATM operator holding a New York virtual currency license.”
The New York virtual currency license, dubbed the BitLicense, is increasingly seen as an essential step for firms keen to increase their appeal to regulated investors, with the likes of Coinbase, Circle and Ripple amongst the others to have secured licenses to date.
Clark said that the license would ultimately further validate the crypto ATM industry, as well as helping ordinary New Yorkers access cryptocurrencies more easily.
He explained, “From the onset, our goal was to provide millions of Americans with a reliable and convenient way to buy digital currency. Bitcoin is no longer a fringe currency, and in 2018, is increasingly being adopted by the mainstream. Today, with the issuance of the virtual currency trading license to a BTM operator, the Bitcoin industry takes another step toward public adoption.”
“This is a landmark day for Coinsource, but an even more important win for New Yorkers. We only hope that this milestone brings further validation to the BTM industry. It proves that regulators will reward entrepreneurs who combine innovation with a willingness to meet best practices and compliance standards,” Clark said.
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The U.S. District Court for the Southern District of New York has ordered the perpetrator of a BTC Ponzi scheme to pay about $3 million in penalties and restitution.
In a press release, the U.S. Commodity Futures Trading Commission (CFTC), which filed the anti-fraud enforcement action against Gelfman Blueprint, Inc. (GBI) and its CEO Nicholas Gelfman, noted that it was the first suit of its kind, of a scam involving BTC, filed by the agency, back in September 2017.
Gelfman was said to have operated a scheme in which from 2014 to 2016, he solicited more than $600,000 from at least 80 people. Gelfman had led his clients to believe that their funds were pooled and traded using a strategy derived from a computer trading program called ‘Jigsaw.’ “In fact, as the [court] Orders indicate, the strategy was fake, the purported performance reports were false, and—as in all Ponzi schemes—payouts of supposed profits to GBI Customers in actuality consisted of other customers’ misappropriated funds,” the CFTC said.
Gelfman was said to have also staged a computer hack that supposedly resulted in the loss of funds.
CFTC Director of Enforcement James McDonald said, “the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.”
CFTC stated that even though GBI and Gelfman were made to pay $554,734.48 and $492,064.53, respectively, in restitution to customers, and $1,854,000 and $177,501 in civil monetary penalties, “orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.”
Apart from the monetary penalties, the court also banned permanently GBI and Gelfman from trading.
The commission considers cryptocurrencies as commodities, and therefore falling under its scope. However, the agency may soon seek authority of blockchain applications beyond just cryptocurrencies.
CFTC Commissioner Brian Quintenz recently warned of smart contracts, which like cryptocurrencies use blockchain technology, being used as “predictive event contracts” by which future events could be betted on, which would put such contracts under the mandate of the CFTC, and could hold smart contract developers liable.