The collapse of FTX signaled that exchange bosses like SBF were not shy about tapping into investors’ holdings to satisfy their greed. A practice that New York regulators intend to eradicate in the vast world of cryptocurrencies and other virtual assets.
Reminder on “sound practices” to observe for a crypto business
Stories of exchange bosses or Web3 project developers shuffling user funds, we’ve seen several. To cite only the case of Sam Bankman-Fried who took directly from the digital assets of FTX customers to make risky bets via Alameda Research. The case of the originator of CluCoin and Goobers NFT, DNP3, which squandered the holdings of several crypto investors in gambling, also sickened enthusiasts.
In a Press release, published as an open letter addressed to the crypto industry, the New York Department of Financial Services (NYDFS) highlighted the need to protect investors in the event of the insolvency of a virtual asset. The letter in question mentioned a regulatory guide. It describes the sound practices to be observed by cryptocurrency companies.
” DFS virtual currency regulation has protected New Yorkers since 2015. Current guidance reminds DFS-regulated virtual currency businesses of our expectations for safeguarding customer assets says Adrienne A. Harris, Superintendent of Financial Services.
New York, where investors are kings
Mr. Harris also highlighted the New York regulator’s expectations of VCE depositories. Holders of a license called “BitLicense” are also concerned. They are divided into four distinct points:
– segregation and separation of customer virtual asset accounting;
– limitation of the interests of the VCE depositary;
– need for approval by the Ministry in connection with the establishment of a virtual currency sub-deposit agreement;
– obligation of disclosure of information to the client by crypto companies.
In order to achieve this, the New York agency declared its project of ” in-depth analysis of the existing regulatory landscape “. An initiative that did not have more to Jesse Powell, CEO of Kraken, at one time. Indeed, he called this form of regulation ” huge for the cryptocurrency industry. Crypto investors disappointed with FTX, however, will see benefits.
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