On Monday, the New York Department of Financial Services announced updates to its virtual currency regulatory regime, including new standards for how digital companies licensed by the agency can list different cryptocurrencies. As part of the overhaul, the DFS removed more than two dozen coins, including Ripple, Dogecoin and Litecoin, from its “green list” of approved coins. There are still eight coins on the list, including Bitcoin, Ethereum and the new PayPal Dollar.
As Congress continues to drag its feet on cryptocurrency regulation, DFS, with its BitLicense program and virtual currency unit, has become the nation’s leading digital asset regulator. While the cryptocurrency industry has often criticized the department’s cumbersome licensing process, the new guidance demonstrates DFS’ cautious approach to cryptocurrency regulation, while other state and federal agencies have opted to take enforcement action.
The DFS created the token greenlist as part of its broader cryptocurrency regulation. Under previous guidance, companies licensed by the DFS through their virtual currency programs can obtain approval to host and list tokens through a self-certification system that helps streamline the process but still grants the department an oversight role as companies still need to notify DFS.
Once both companies self-certify a token for custody or listing, the cryptocurrency will be included on the DFS Green List, meaning the token will be approved for custody or listing by any DFS-licensed company, further speeding up the process and Promote the use of approved tokens.
Based on the August version shared with wealthThe green list previously included 25 tokens approved for custody, listing, or both, with notable names including Bitcoin, Dogecoin, Ethereum, Litecoin, Ripple, and the new PayPal Dollar.
As part of the new guidelines, DFS announced that it will update its green list, which currently only has 8 tokens. USDC, the second-largest stablecoin by market capitalization issued by BitLicense assignee Circle, did not appear on the green list in previous or updated versions. A DFS spokesman declined to comment.
In a press release shared on Monday, DFS said the new guidance will “clarify” the department’s expectations regarding token listing and delisting policies for DFS-regulated entities. DFS said that in addition to updating the green list, it will also improve the risk assessment standards of the token listing policy and increase the requirements for businesses facing retail customers, unlike the previous self-certification system. Licensees must now also have a token delisting policy in place to ensure companies can end support for the token in a way that mitigates the impact on users.
Led by Director Adrienne Harris, the unit took on a strict oversight role during the cryptocurrency bear market. DFS has issued its first penalties against cryptocurrency companies, including a $100 million settlement with Coinbase in January 2023 over failed compliance programs. In February, the DFS ordered cryptocurrency company Paxos to stop issuing BUSD, the leading stablecoin it issued in partnership with Binance.
DFS still commands the grudging respect of many in the U.S. cryptocurrency industry, while other regulators like the SEC are reluctant to get involved in rulemaking for the volatile industry. The updated green list reflects the ongoing dilemma faced by cryptocurrency companies, especially exchanges, in deciding which tokens to include amid regulatory uncertainty.
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