New York proposes to charge crypto firms for regulation

Superintendent Adrienne Harris of the Department of Family and Social Services came up with the idea for the move, and she is currently seeking public input on it. The regulator aims to achieve additional supervisory controls.

The New York State Department of Financial Services (DFS) has proposed an amendment to state statutes that would give it the authority to tax licensed cryptocurrency businesses for the costs of regulating those businesses.

It may seem strange to you, but in accordance with the Financial Services Law (FSL), it is standard practice for the Department of Financial Services to tax regulated non-crypto financial organizations for the costs and expenses of maintaining control over them.

DFS Superintendent, Adrienne Harris, is the driving force behind the idea. On December 1, she announced the move via the DFS website and then proceeded to send it out to the public for input over the following ten days.

When crypto regulation was first implemented in New York in 2015, the Financial Services Law did not include a provision for crypto companies, so Harris’ goal is to amend the law to include such a provision. Essentially, Harris wants to bring businesses that trade in virtual currencies in line with other financial entities that are regulated in the state.

Harris further explains that these “regulations will allow the Department to continue to hire outstanding talent for its virtual currency regulatory staff.”

In the paper linked to the plan, it is stated that DFS will charge fees to businesses based on the entire operating expenses of supervisory licensees in addition to “the proportion considered fair and acceptable” for other operating and administrative costs.

As a consequence, there is no predetermined sum that all businesses must pay because the level of control to which each company is subject varies. On the other hand, the entire amount due will be divided into five payment periods spread over the financial year.

It shouldn’t come as a surprise that regulators are trying to impose additional regulatory oversight, given that the cryptocurrency sector has recently witnessed another multi-billion dollar implosion, this time as a result of the now-defunct FTX, Alameda Research and former golden boy Sam Bankman-Fried.