Source: Aiying Compliance
According to Aiying's official website, one of the newly announced lists is Web3 infrastructure provider Fireblocks, which has obtained a Limited Purpose Trust Charter to provide customers with cryptocurrency custody services in the United States, allowing it to engage in virtual reality currency business, is expected to soon begin offering cold storage hosting solutions based on Fireblocks technology to U.S. customers.
Source: New York State Department of Financial Services NYDFS
Fireblocks’ trust company is part of its global plan to establish a regulated cryptocurrency custody network. Fireblocks launched a global network of digital asset custody companies in June that use Fireblocks technology and connect with customers through the Fireblocks platform. Obtaining a limited purpose trust company license provides an alternative for crypto companies to do business in New York State and provides additional benefits compared to the New York State BitLicense license. According to NYDFS, “a limited purpose trust company may exercise fiduciary powers, including custody services, and may engage in the business of money transmission in New York State without obtaining a separate New York money transmission license.”
In the United States, federal and state laws have formed a subtle "competition" relationship in the regulation of cryptocurrency. Regulation at the federal level is primarily the responsibility of FinCEN, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). FinCEN regulates cryptocurrency trading through the BSA, requiring businesses to register as MSBs and adhere to strict anti-money laundering (AML) and customer due diligence (KYC) requirements. The SEC focuses on whether cryptocurrencies constitute securities and regulates their issuance and trading. The CFTC is responsible for the regulation of cryptocurrency futures and derivatives financial products markets.
State-level supervision shows diverse characteristics. New York State’s BitLicense is currently the most stringent state-level cryptocurrency regulatory system, requiring companies to obtain a license to operate within the state. The process of obtaining a BitLicense is complex and expensive. Not only do companies need to pay high application fees, they also need to invest significant resources to meet strict compliance requirements. However, businesses that obtain a BitLicense tend to gain greater market trust and recognition. For example, companies such as Coinbase and Gemini that obtain BitLicense enjoy higher credibility among users and investors, which helps them attract more customers and funds. For a more detailed introduction to the global system of U.S. virtual currency licenses, you can read: [Payment] An in-depth analysis of the legal basis and requirements for U.S. cryptocurrency payment licenses.
Today Aiying mainly wants to introduce the two licenses that Web3 companies need to carry out virtual currency business in New York State: BitLicense and Limited Purpose Trust Charter.
BitLicense New York Virtual Currency License
The full name of BitLicense is "New York State Department of Financial Services Virtual Currency License". It is a regulatory framework launched by the New York State Department of Financial Services (NYDFS) in 2015 to regulate virtual currency-related businesses in New York State. company. In other words, if you want to engage in the purchase, sale, storage or transfer of Bitcoin or other virtual currencies in New York State, you must first obtain this license. The following is a detailed introduction to BitLicense:
1. Scope of application
The BitLicense applies to all entities engaged in virtual currency business within New York State, including:
Reception, storage and transfer of virtual currency: such as providing virtual currency wallet services.
Virtual Currency Exchange: Convert virtual currency to U.S. dollars or other currencies, or vice versa.
Virtual currency trading: buying and selling virtual currency transactions such as Bitcoin.
Payment Processing: Services that use virtual currencies to make payments.
BitLicense is a broad term, but it actually covers licenses for different types of business. Applications are divided into the following two types based on the specific business the company is engaged in:
Virtual Currency License: describes the license to engage in basic virtual currency business (such as storage, transfer). This type of license is suitable for businesses that do not involve the transmission of fiat currency. It can be understood as a virtual exchange license.
Virtual Currency and Money Transmitter License: This is more complex and applies to companies that not only do virtual currency, but also involve converting virtual currency into legal currency or making transfers. It can be understood as VAOTC virtual currency over-the-counter trading license.
2. Main requirements
Companies applying for a BitLicense must meet a series of strict requirements, including but not limited to:
Capital Requirements: Companies are required to maintain adequate capital reserves to ensure financial health.
Compliance requirements: Companies are required to develop and implement anti-money laundering (AML) and know-your-customer (KYC) procedures to prevent illegal activities.
Cyber security: Companies need to establish a cyber security plan to ensure the security of customer data and funds.
Consumer protection: Companies need to take measures to protect consumer rights and fully disclose relevant risks before transactions.
Reporting and Recordkeeping: Companies are required to submit periodic financial statements to NYDFS and maintain all relevant business records for at least seven years.
Currently, according to official website data, 22 institutions have obtained BitLicense licenses, including companies we are familiar with: PayPal, Robinhood, Bitstamp USA, Ripple, Coinbase and other well-known institutions. The following is a list of 22 institutions:
Source: New York State Department of Financial Services NYDFS
Limited Purpose Trust Charter
A limited purpose trust company license is a license issued by the New York State Department of Financial Services (NYDFS) specifically for trusts and asset custody. This license allows the company to manage and custody client assets as a fiduciary within New York State, which can include traditional financial assets (such as cash, securities, etc.) as well as virtual currencies. The following is a detailed introduction to the license:
1. Definition and purpose
Definition: A limited purpose trust company license allows the company to act as a trustee and provide clients with asset custody and management services. This license is usually issued to institutions that focus on providing fiduciary services, asset management and custody services.
Purpose: Companies holding this license can manage various types of assets, including but not limited to cash, securities, precious metals and virtual currencies. This allows them to provide clients with more specialized services, such as asset management, financial planning, estate management, etc.
2. Application requirements
Companies applying for a limited purpose trust company license must meet a series of strict requirements, which typically include:
Capital Requirements: The company needs to maintain sufficient capital to ensure its financial stability and service capabilities. Capital requirements are typically adjusted based on the size of assets the company plans to manage and its risk profile.
Background Checks for Management: NYDFS requires rigorous background checks on a company’s executive officers and board members, including their legal compliance, financial status and professional qualifications.
Business plan: The company needs to submit a detailed business plan describing the scope of its trust and custody services, target market, operating model, etc.
Compliance plan: Applicants need to develop a comprehensive compliance plan to ensure that their business activities comply with relevant laws and regulations. In particular, compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations is required.
Cybersecurity measures: Companies must demonstrate their cybersecurity capabilities to protect customer data and custody assets.
3. Regulation and Compliance
After obtaining a limited purpose trust company license, the licensed company must continue to comply with the regulatory requirements of NYDFS, including but not limited to:
Regular audits: Companies are required to undergo regular audits, which include financial reports, compliance procedures, risk management measures, etc.
Reporting Obligations: Certified companies must regularly submit financial statements and other related reports to NYDFS to ensure that their operations are transparent and compliant.
Consumer protection: Companies are required to develop and implement strict consumer protection measures to ensure the safety of customers' assets and provide adequate risk disclosure during the service process.
Currently, a total of 12 institutions have obtained this license, including Coinbase Custody Trust, a subsidiary of Coinbase, which has provided custody services for 8 Bitcoin ETFs in the United States. The following is the list of licensed institutions:
Source: New York State Department of Financial Services NYDFS
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: Aiying Compliance
