DFS approves virtual currency use for commercial banking transactions

11225394_892546234160850_1173950327599401243_nThe state Department of Financial Services has authorized the state-chartered Signature Bank to offer a new digital payment platform called Signet. The Signet platform leverages blockchain technology to permit Signature Bank’s commercial clients to transfer “Signets” to make payments with no transaction fees, at any time of the day, year-round.

The ability to transmit funds at all times is an innovation for bank payment systems, allowing clients to make instant payments. The new Signet platform authorized by DFS allows funds to be transferred in real-time between two commercial clients of Signature Bank, which eliminates any dependence on a third party.

“This goes to show that technology will always outpace the regulators,” said Henry Meier, New York Credit Union Association general counsel. “The licensing of a real-time payment system using blockchain technology underscores the need for credit unions to prioritize technological innovation. Members expect convenient services and quicker payments.”

According to the DFS the bank will have to:

  • implement, monitor and update effective controls to prevent money laundering or terrorist financing;
  • implement, monitor and update effective risk-based controls to prevent and respond to any potential or wrongful use of virtual currency;
  • comply with DFS’ transaction monitoring and cybersecurity regulations; and
  • maintain policies and procedures for consumer protection and to address and resolve customer complaints.

From a credit union standpoint, the Association supports and welcomes innovation, but will continue to guard against any attempt to put credit unions on an uneven regulatory playing field.

To learn more, visit DFS’ website.

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