United States – Financial Services

The New York State Department of Financial Services (NYDFS) has
instituted a new draft General Framework for Greenlisted Coins.
This roadmap for approval of new coin listings shows how the draft
guidance issued by NYDFS on Sept. 18 fits into the entire NYDFS
process. Public comments are due by Oct. 20, 2023, and should be
sent to innovation@dfs.ny.gov with “Proposed Coin-Listing
Policy Framework” in the subject line. A few observations:

1. The listing process provides no certainty that any coin can
   continue to be listed in New York nor any precise temporal
   parameters for approval and de-listing events. Liquidity and volume
   will suffer for NYDFS-regulated entities until due process
   safeguards are in place protecting against NYDFS delisting
   actions.




2. A well-designed regulatory process allows for straight through
   processing, approval requests should not be held by supervisory
   staff. Market intelligence indicates there has been a six- to
   24-month waiting periods for staff to approve policies at NYDFS.
   NYDFS should consider moving to a non-objection regime with a hard
   outside date (e.g., 10 business days).




3. Knowledgeable supervisory staff is key to regulating this
   market – financial services experience is a must. Otherwise,
   supervisory staff is not in a position to ever say “yes”
   (leading to chokepoints in the decision-making process) and will
   focus on form rather than substance (because that’s what junior
   people do).




4. NYDFS is telling entities to implement the draft guidance now,
   prior to analysis and testing by industry participants, and without
   assurance that required policies and procedures positively impact
   the suitability, safety, and market appropriateness of listed
   assets. This indicates either an unrealistic implementation period
   after the draft is finalized or a fait accompli that renders the
   comment period useless.

Transparency is key to confidence in our financial regulators
and the New York financial markets. Comments submitted to NYDFS are
not made public except possibly under a Freedom of Information Act
(FOIA) request. This allows market participants to speak freely
when submitting comments but also makes the process opaque (stay
tuned – more to come).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.