All Things FinReg

In this new series, we will provide an overview of recent noteworthy developments in the digital asset space around the world. The start of February was a busy period for regulators in the United States, where the US Securities and Exchange Commission (SEC) settled charges against an exchange in connection with its staking services and where other regulators issued digital asset guidance. Both the United Kingdom and Dubai Virtual Asset Regulatory Authority introduced plans to regulate digital asset activities. The Hong Kong Monetary Authority released a framework for stablecoin regulation, but it is unclear whether a new law will be adopted or existing laws will be amended to incorporate the framework.

In the depth of a crypto winter, the New York State Department of Financial Services (DFS) issued guidance (the Guidance) on custodial standards for those with a BitLicense or that are registered as New York state limited purpose trust companies that engage in virtual currency (VC) business activity (VC Trust Companies and, together with BitLicensees, VC Custodians). In addition to providing customer segregation and compliance standards, DFS also announced in the Guidance its position that a VC Custodian that enters into a sub-custody arrangement must obtain prior DFS approval before the arrangement’s implementation.

Stepping in to fill a perceived regulatory and enforcement void at the federal level, the governor of New York and his acting superintendent of the New York Department of Financial Services (DFS) have created a division within DFS that amounts to a mini-(federal) Consumer Financial Protection Bureau (CFPB).