A New York State-chartered commercial bank, Signature Bank, has been awarded a permit to develop a blockchain-driven real-time payment system, the state’s Department of Financial Services (NYDFS) said on Tuesday. The project, called Signet Platform, is a joint initiative between the bank and trueDigital, a cryptocurrency exchange owned by New York’s swap market trueEX.
Signature Bank and trueDigital decided to use distributed ledger technology (DLT) because the blockchain allows settlement of transactions at any time with no need for a third party. Currently, the bank’s clients must send their payments within the working hours, which takes a lot of time, causes delays and worth significant amount of money, Joseph J. DePaolo, Signature Bank’s president and CEO explained. The DLT system will increase time efficiency and will significantly cut the operational cost at it eliminates the need for paper documentation and bank employee support.
The Signet Platform will have a minimum account balance requirement of $250,000 for clients.
“There are many commercial enterprises and transactions that benefit from real-time payments capabilities, such as the wholesale energy distribution market and over-the-counter institutional trade and settlement activities, just to name a few,” DePaolo said in a statement.
NYDSF granted Signet Platform a permit after conducting an analysis of the initiative and its investor protection systems. The product will be subject to additional inspection by the regulator’s examiners and independent consultants. The project must follow several New York State requirements including anti-money laundering (AML) provisions, measures to prevent terrorist financing, and NYDFS’ transaction monitoring and cybersecurity regulations.
The Signet Platform, which will transmit US dollar payments, must also:
“Implement, monitor and update effective risk-based controls to prevent and respond to any potential or actual wrongful use of virtual currency, including but not limited to its use in illegal activity, market manipulation, or other similar misconduct,” NYDFS said.
New York is one of the most active US states in regulating the cryptocurrency industry. NYDFS has created a special virtual coin permit called a BitLicense, which has been granted to several projects including the Winklevoss’ twins Gemini exchange.
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