February 17, 2020

February 17, 2020

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Conference of New York State Bank Supervisors Issues Draft Model Regulatory Framework on Virtual Currency

On December 16, the Conference of State Bank Supervisors (CSBS), a state banking watchdog group, released a draft model regulatory framework on virtual currency (Draft Framework) that is less stringent than the originally released BitLicense proposal from the New York State Department of Financial Services (DFS). 

The CSBS Emerging Payments Task Force (Task Force) engaged in a year-long assessment of virtual currency activities, focusing its assessment on consumer protection, market stability and law enforcement. The covered activities under the Draft Framework include transmission, exchange and services facilitating the third-party exchange, storage and/or transmission of virtual currency. Excluded activities include the use of virtual currencies solely for the purchase or sale of goods and services and certain non-financial technologies, such as a cryptography-based ledger for non-financial recordkeeping. 

The Draft Framework builds on the BitLicense proposal but removes some of the stricter provisions. Among other things, the Draft Framework states that state regulatory regimes should include provisions on licensing, financial stability, consumer protection, cyber security, recordkeeping and supervision. Unlike the BitLicense proposal, the Draft Framework only requires compliance with federal anti-money laundering requirements and not state level requirements. The Draft Framework also applies primarily to businesses acting on behalf of customers or other parties, a narrower range of entities than the initial BitLicense proposal. The Draft Framework could, however, include third-party exchanges or companies creating wallet software, which typically do not have custody of consumer funds. 

The Draft Framework offers guidance to state regulatory agencies, potentially leading to clarity, consistency across state lines and recognition of each state’s respective virtual currency licenses. 

The CSBS is accepting public comments until February 16, 2015, electronically by PDF or by mail: Attn: Emerging Payments Task Force, Conference of State Bank Supervisors, 1129 20th Street NW, 9th Floor, Washington, DC 20036. 

Click here to read the CSBS policy statement, here to read the Draft Framework and here to read the initial DFS BitLicense proposal.

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Claudia Callaway, Litigation Lawyer, Katten Muchin
Partner

Claudia Callaway is chair of Katten’s Consumer Finance Litigation practice and co-chair of the Class Action and Multidistrict Litigation practice. She focuses her practice on the defense of state and federal class actions regarding consumer protection and consumer finance laws and representation of clients before the Consumer Financial Protection Board (CFPB), the Federal Trade Commission (FTC) and state banking agencies.

Claudia represents consumer lenders, third-party debt collectors and other consumer  financial services clients in class action suits and...

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Christina J. Grigorian, Banking legal Specialist, Katten Muchin Law firm
Special Counsel

Christina J. Grigorian counsels clients in all matters related to banks, bank holding companies, and state and foreign-licensed consumer and commercial lenders. Ms. Grigorian provides advice to the firm’s financial institution clients concerning structural and operational issues, including legislative developments impacting such operations, and has worked with companies and individuals in the establishment of de novo entities, including national banks, federal savings banks and state-chartered institutions, as well as state-licensed lenders. She has also counseled clients with respect to...

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