BILL NUMBER: S3262
SPONSOR: COONEY
 
TITLE OF BILL:
An act to amend the banking law and the financial services law, in
relation to limited purpose trust companies
 
PURPOSE OF THE BILL:
To create a comprehensive framework to codify the department of finan-
cial services current procedures with respect to authorizing limited
purpose trust companies and establishing a statutory mechanism to over-
see the use of digital assets therein.
 
SUMMARY OF PROVISIONS:
Section One: Creates a new article 3-c of the banking law which:
Section 156: details the procedure for the creation of a limited purpose
trust company; and
Section 157: upon approval details the procedure to commence operations
as a limited purpose trust company; and
Section 158: Creates a statutory framework to govern the safe and secure
operations of a limited purpose trust company; and
Section 159: Creates safeguards when dealing with stablecoin and other
digital assets within the context of a limited purpose trust.
Section 2: Amends the Financial Services Law to create clear statutory
oversight authority for the superintendent to oversee individuals acting
within the digital asset marketplace, and creates a pathway for reci-
procity with other state statutes.
Section 3: Removes a limited purpose trust from an application for
dissolution in court under section 9c of the banking law.
Section 4: Modifies the receivership provisions of section 606 of the
banking law to provide for application to a limited purpose trust compa-
ny.
Section 5: Creates a new subdivision seven in section 617 of the banking
law to clarify that a stablecoin reserve held in trust by a limited
purpose trust company is not owned by the limited purpose trust company,
nor is it a bailment, pursuant to this section, but rather governed by
the provisions of section 159.
Section 6: Provides the effective date 180 days after it shall become
law, provided that the agencies may effectuate regulatory action in
advance of such date.
 
JUSTIFICATION:
The regulatory framework that the Department of Financial Services put
forward in 2015 was a groundbreaking achievement to govern "crypto" or
other digital blockchain assets as a part of its oversight of the bank-
ing community. Since then, while the oversight of the Department has
continued to be at the forefront of the blockchain technology, the lack
of clear statutory guardrails has also had the effect of creating uncer-
tainty around these assets.
What has become clear almost nine years later, is that the digital
assets that are being utilized are here to stay and the Department of
Financial Services should have clear and precise authority to regulate
these assets in the manner with which they have been. This legislation
further refines the authority to permit the Department to take certain
action by regulation, where the technology or other flexibility mandates
that the Department be nimble enough to capture new issues as they
arise.
Additionally, this bill codifies necessary consumer protections to
ensure that the individuals who are operating in this space are able to
understand the risks and liabilities. This does not restrict the ability
for the Department to oversee securities in any way, but merely provides
a statutory framework to bolster the existing authority.
New York should continue to be a leader in this new frontier of banking,
and this legislation will ensure that New York continues to provide a
safe haven for consumers to participate in the market, knowing and
understanding that they will be protected.
 
LEGISLATIVE HISTORY:
2023-24: S.8364
 
FISCAL IMPLICATIONS:
None to the state.
 
EFFECTIVE DATE:
180 days after it shall have become law.

Statutes affected:
S3262: 301 financial services law, 9-c banking law, 9-c(1) banking law, 606 banking law, 617 banking law, 617(1) banking law