Recently, NYDFS published an industry letter to “all virtual currency business entities licensed under 23 NYCRR Part 200 or chartered as limited purpose trust companies under the New York Banking Law,” disclosing that it is closely monitoring the rise of sentiment-based cryptoassets, which are often created on unlicensed platforms, and therefore are not subject to the rigorous cryptoasset standards New York law maintains to protect consumers. The NYDFS’s letter also asserted these cryptoassets are typically owned by a small group of individuals, are not broadly traded, and are prone to significant price volatility. For these reasons, the NYDFS advised that cryptoassets with these characteristics are incompatible with the Department’s Guidance on Coin-Listing and on Market Manipulation, carry significant risk, may be favorable instruments for market manipulation tactics like “wash trading” and “pump-and-dump schemes,” and often maintain poor security standards. Finally, NYDFS reminded licensed cryptoasset businesses to comply with all applicable laws, regulations and guidance, and advised it will continue to closely monitor regulated entities and take supervisory and enforcement action when necessary.
