On Monday, the New York Department of Financial Services announced an update to its virtual currency oversight regime, including new criteria for how digital firms licensed by the agency can list different cryptocurrencies. As part of the revamp, DFS removed over two dozen tokens from its “greenlist” of approved tokens, including Ripple, Dogecoin, and Litecoin. Eight tokens are still on the list, including Bitcoin, Ether, and the new PayPal Dollar.
As Congress continues to drag its feet on crypto regulation, DFS has established itself as a nation-leading digital asset supervisor thanks to its BitLicense program and virtual currency unit. While the crypto industry frequently critiques the department for its laborious licensing process, the new guidance demonstrates DFS’ measured approach to crypto regulation, as other state and federal agencies opt for enforcement actions.
DFS created the token greenlist as part of its broader crypto supervision. Under the previous guidance, firms licensed by DFS through its virtual currency program could gain approval to custody and list tokens by a self-certification system that helped streamline the process but still granted the department a supervisory role, as the firms still had to inform DFS.
Once two firms had self-certified a token for either custody or listing, the cryptocurrency would be included in the DFS greenlist, meaning the token would be approved for custody or listing by any DFS-licensed firm, further expediting the process and facilitating the use of the approved tokens.
According to an August version shared with Fortune, the greenlist previously included 25 tokens approved for custody, listing, or both, with prominent names including Bitcoin, Dogecoin, Ethereum, Litecoin, Ripple, and the new PayPal Dollar.
As part of its new guidance, DFS announced it would be updating its greenlist, which now has only eight tokens. USDC, the second-largest stablecoin by market cap issued by the BitLicense grantee Circle, did not appear on either the previous or the updated versions of the greenlist.
“The list of greenlisted coins has been updated to follow the new general framework for greenlisted coins,” a DFS spokesperson said in a statement shared with Fortune.
In a press release shared on Monday, DFS said that the new guidance would “clarify” the department’s expectations for coin-listing and delisting policies of DFS-regulated entities. Along with updating the greenlist, DFS said it would be heightening risk assessment standards for coin-listing policies and enhancing requirements for retail customer-facing businesses, a departure from the previous self-certification system. Licensees must also now have a token-delisting policy that ensures that firms can end support for coins in a way that mitigates the impact on users.
Under Superintendent Adrienne Harris, the department has taken a strict oversight role during the crypto bear market. DFS brought its first penalties against cryptocurrency companies, including a $100 million settlement with Coinbase in January 2023 for failures in its compliance program. In February, DFS ordered the crypto firm Paxos to stop issuing BUSD, a leading stablecoin that it issued in partnership with Binance.
DFS has still won the begrudging respect of many in the U.S. crypto industry, with other regulators such as the Securities and Exchange Commission reluctant to engage in rule-making for the volatile sector. The updated greenlist reflects a persistent dilemma for crypto firms, and especially exchanges, as they decide which tokens to include amid regulatory uncertainty.