New York approves blockchain-based ‘real-time’ digital payment service

Getting your Trinity Audio player ready...

The New York Department of Financial Services (NYDFS) has granted virtual currency approval to commercial banking transactions, authorizing a new system from Signature Bank which will allow corporate customers to make bank payments in a form of virtual currency.

Dubbed ‘Signet,’ the platform will allow the bank’s commercial customers to send transactions in tokens known as ‘Signets,’ allowing for free transactions sent directly at any time via the blockchain.

The approval is part of the department’s approach to fostering ‘regulated innovation,’ in providing greater flexibility for Fintech innovation and research.

DFS Superintendent Maria T. Vullo welcomed Signet, which she said would provide a low cost way for businesses to send payments.

“DFS is pleased to strengthen and foster regulated innovation in New York’s burgeoning financial technology sector, specifically within our state-chartered banking system,” Vullo said in a statement. “New York continues to support and help advance innovation through sound state regulation and with products such as Signet, which provide lower-cost ways for businesses to efficiently make payments.”

Joseph J. DePaolo, president and CEO at Signature Bank, said the support of the Department of Financial Services was crucial in helping them turn their digital vision into reality. He noted, “Through regulated innovation, we were able to turn our vision into a reality. It is clear the Superintendent and Department of Financial Services have thoroughly researched the financial technology arena and understand how it impacts the future of financial services. We look forward to working closely with their team to continue to transform digitally.”

Fintech innovation often runs into challenges with regulation, particularly around transactions that might typically require a degree of regulation and licensing beyond the grasp of most startups.

By giving the go-ahead to the Signet scheme as a virtual currency, the DFS has underlined its commitment to supporting emerging applications for cryptocurrency assets.

The approval comes following an extensive and robust assessment of Signature Bank’s application, and is attached to stringent compliance requirements.

Nevertheless, it demonstrates a proactive response from a regulator, at a time of increasing focus on blockchain developments of this kind.