New York-based Signature Bank has secured approval from the State Department of Financial Services to issue a virtual currency known as “Signets” to its customers.
Financial Services Superintendent Maria T. Vullo confirmed the approval in a press release which disclosed that the virtual currency would be offered on a blockchain-based digital payment system developed by the commercial bank.
Customers of Signature Bank will use the new system to “transfer ‘Signets’ to make payments with no transaction fees, at any time of the day, year-round”. Being built on a private Ethereum blockchain makes it possible for funds to be transferred between customers in real-time without the need for a third party according to the release.
Superintendent Maria T. Vullo confirmed that the financial services department had subjected the new Signet platform to “comprehensive and rigorous review” before giving its approval. Its operators (Signature Bank) will now have to make sure that the system continues to meet up with regulatory requirements such as Anti-Money Laundering, anti-fraud and customer protection measures.
Additionally, the release confirms that customers “Signets” funds can be secured with the Federal Deposit Insurance Corporation (FDIC) to cover any unforeseen losses.
NYDFS Approved “Signets” To Support Regulated Innovation
The latest development marks the first time that a New-York based commercial bank is developing a blockchain-based virtual currency for its customers. It is therefore also the first time that the New York regulators are giving their consent to such innovation.
Superintendent Maria T. Vullo explained in the release that granting Signature Bank approval to carry out their concept is the DFS’s contribution to “strengthen and foster regulated innovation in New York’s burgeoning financial technology sector.”
The concept of virtual currencies built on blockchain is still new to the commercial banking sector even though traditional coins like Bitcoin have been around for ten years. But with Signature Bank making a head start, there is a chance that more banks in New York City will adopt it if it goes down well with banking clients.