NYDFS Finalizes Regulation on Virtual Currency Licensee Assessments

The New York Department of Financial Services ("NYDFS") adopted a final regulation implementing an approach to assessing costs and expenses of individuals who are regulated by the NYDFS and engage in "virtual currency business activity."

Under Title 23 Part 102 of the Official Compilation of Codes, the NYDFS established a billing and assessment process for examination procedures of virtual currency licensees. The NYDFS stated that individuals will receive bills for each license five times per fiscal year which must be paid within 30 days of each billing date. The NYDFS will also require a total annual assessment from each licensee based on (i) the cost of the examining licensees (i.e., the "Regulatory Component") and (ii) the "Supervisory Component" sum as defined in the final rule.

According to the NYDFS, the penalty for nonpayment by a licensee could include "suspension, revocation, expiration or termination of a person's license." The final rule also includes a provision regarding special assessments which allows for the NYDFS to determine that expenses resulting from a specific examination are "best allocated" to a specific licensee. The NYDFS said that a special assessment may be made based off of several factors, such as (i) the significance of an examination for a business's operations, (ii) the seriousness of the regulatory violations identified by the examination and (iii) whether a licensee attempted to cover up the regulatory violations. In instances of a special assessment, the NYDFS said that licensees must be billed separately and the assessment must be paid within 30 days of the billing date.

The final rule is effective April 19, 2023.