New Law Gives NYDFS Power to Make Virtual Currency Business Activities in New York More Expensive

Businesses engaged in virtual currency business with a BitLicense or New York State Department of Financial Services (NYDFS) Limited Purpose Trust Charter may now incur additional fees for supervision in New York, as provided for in New York State’s FY2023 budget bill. Signed into law on April 9, 2022 by Governor Kathy Hochul, Senate Bill S.8008C (the “Legislation”) amends New York’s financial services laws to cover NYDFS’ operating expenses for overseeing companies that engage in virtual currency business.


In June 2015, NYDFS issued virtual currency regulations 23 NYCRR Part 200 under New York Financial Services Law. According to NYDFS, to engage in “virtual currency business activity” in New York State, entities can either apply for a “BitLicense” or charter under New York banking law – for example, as New York State Limited Purpose Trust Company – licensed to conduct business in virtual currency. The law defines “virtual currency business activity” as the conduct of any of the following types of activities involving New York or a New York resident:

  • Receive virtual currency for transmission or transmit virtual currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of virtual currency;
  • Store, hold or maintain custody or control of virtual currency on behalf of third parties;
  • Buy and sell virtual currency as a corporate client;
  • Performing exchange services as a corporate client; or
  • Control, administer or issue virtual currency.

A few differences exist between a BitLicense and a limited purpose trust charter. For example, a Limited Purpose Trust Company can exercise fiduciary powers, while a BitLicensee cannot. In addition, a limited purpose trust company may engage in New York money transmission without obtaining a separate New York money transfer license.

NYDFS first approved a BitLicense application in 2015 and has since issued numerous virtual currency licenses and limited use trust charters with permission to conduct virtual currency business. Application fees are $5,000 (BitLicense) and $12,500 (Limited Purpose Trust Charter). However, applicants generally spend significantly more to prepare applications, which provide information relating to the applicant’s financial situation as well as responsibility, financial and business experience, and general character and aptitude. management and the candidate’s board of directors. The licensees are subjected to examinations at least once every two years to determine, among other things, the licensee’s financial condition, security and soundness of business conduct and compliance with license requirements, including anti-money laundering money and compliance with sanctions. With recent legislation, virtual currency businesses must now expect to be subject to additional fees associated with these biennial reviews.

NYDFS Increased Authority Under Legislation

According to the Legislation:

  • NYDFS will annually assess entities engaged in licensed virtual currency business activities in such amounts as the Superintendent of NYDFS deems “just and reasonable” to cover NYDFS operating expenses that are solely attributable to the regulation of such entities. ;
  • NYDFS operating expenses not covered by assessments (i.e. not solely attributable to a specific regulated entity) will be assessed on an industry-wide basis for all entities that engage in currency trading activities Virtual ;
  • Virtual currency businesses subject to review by NYDFS will bear the burden of such review fees, although NYDFS, at its discretion, may reduce or eliminate such fees. However, no guidance has yet been provided to determine the criteria by which NYDFS will potentially reduce or eliminate exam fees; and
  • To align virtual currency business oversight with other industries overseen by NYDFS, individuals engaged in virtual currency business activities will not be assessed for NYDFS expenses that only benefit those regulated by the insurance or New York banks.

The Act will enter into force on Wednesday, June 8, 2022.

In a statement on the fiscal year 2023 budget, NYDFS Superintendent Adrienne A. Harris welcomed the new authority to collect oversight fees from licensed virtual currency businesses, noting that the ability to recoup these costs to oversee virtual currency companies – just as NYDFS does for banks and insurance companies – will enable DFS to “create staff with the ability and expertise to better regulate and support this rapidly growing industry”.

Key points to remember

Digital asset businesses operating in New York, or planning to engage in licensed virtual currency business in New York, should anticipate the additional operating and review costs associated with obtaining and maintaining virtual currency licenses in New York. These institutions should consider these increased costs when evaluating their business strategies, fundraising, and budgeting for applications and annual expenses.