S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   8364
 
                             I N  S E N A T E
 
                             January 22, 2024
                                ___________
 
 Introduced  by  Sen.  COONEY -- read twice and ordered printed, and when
   printed to be committed to the Committee on Banks
 
 AN ACT to amend the banking law  and  the  financial  services  law,  in
   relation to limited purpose trust companies
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. The banking law is amended by adding a new article  3-C  to
 read as follows:
                                 ARTICLE 3-C
                      LIMITED PURPOSE TRUST COMPANIES
 SECTION 156. LIMITED PURPOSE TRUST COMPANY CREATION.
         157. APPLICATION  TO  COMMENCE  OPERATION  AS  A LIMITED PURPOSE
                TRUST COMPANY.
         158. LIMITED PURPOSE TRUST COMPANY OPERATION.
         159. SPECIAL PROVISIONS RELATING TO DIGITAL ASSETS.
   § 156. LIMITED PURPOSE TRUST COMPANY CREATION. 1. IF  THE  SUPERINTEN-
 DENT  SHALL  FIND  THAT  A  TRUST COMPANY HAS MET THE CONDITIONS OF THIS
 ARTICLE, AND HAS IN GOOD FAITH COMPLIED WITH ALL OTHER  REQUIREMENTS  OF
 LAW  AND  FULFILLED ALL CONDITIONS PRECEDENT TO COMMENCING BUSINESS AS A
 LIMITED PURPOSE TRUST COMPANY PURSUANT TO THIS ARTICLE, THE  SUPERINTEN-
 DENT  SHALL  PROMPTLY  ISSUE  AND EXECUTE UNDER THE OFFICIAL SEAL OF THE
 DEPARTMENT, IN TRIPLICATE, AN AUTHORIZATION CERTIFICATE TO THE PERSON OR
 PERSONS NAMED IN SUCH ORGANIZATION CERTIFICATE.
   2. SUCH AUTHORIZATION CERTIFICATE SHALL BE  CONCLUSIVE  EVIDENCE  THAT
 ALL  CONDITIONS PRECEDENT HAVE BEEN FULFILLED AND THAT A LIMITED PURPOSE
 TRUST COMPANY HAS BEEN FORMED UNDER THIS ARTICLE, EXCEPT IN AN ACTION OR
 SPECIAL PROCEEDING BROUGHT BY THE SUPERINTENDENT OR THE ATTORNEY  GENER-
 AL.   THE SUPERINTENDENT SHALL CAUSE ONE OF THE TRIPLICATE AUTHORIZATION
 CERTIFICATES TO BE TRANSMITTED TO SUCH LIMITED  PURPOSE  TRUST  COMPANY,
 ONE  TO BE FILED IN THE OFFICE OF THE DEPARTMENT, AND ONE TO BE FILED IN
 THE COUNTY CLERK'S OFFICE OF  THE  COUNTY  IN  WHICH  SUCH  ORGANIZATION
 CERTIFICATE  HAS BEEN FILED. THE COPIES OF THE AUTHORIZATION CERTIFICATE
 FILED IN THE OFFICES OF THE SUPERINTENDENT AND THE COUNTY CLERK SHALL BE
 ATTACHED TO THE PREVIOUSLY FILED COPIES OF THE ORGANIZATION  CERTIFICATE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD14145-02-4
 S. 8364                             2

 AND  SUCH CERTIFICATES SHALL BE RECORDED IN THE RECORDS OF INCORPORATION
 THEREIN.
   3.  ANY LIMITED PURPOSE TRUST COMPANY WHICH DOES NOT COMMENCE BUSINESS
 AS SUCH WITHIN SIX MONTHS AFTER THE  DATE  ON  WHICH  ITS  AUTHORIZATION
 CERTIFICATE  IS ISSUED BY THE SUPERINTENDENT PURSUANT TO SUBDIVISION ONE
 OF THIS SECTION SHALL FORFEIT SUCH TRUST COMPANY'S RIGHTS AND PRIVILEGES
 AS A LIMITED PURPOSE TRUST COMPANY AND CORPORATE POWERS SHALL CEASE  AND
 DESIST,  UNLESS THE TIME WITHIN WHICH SUCH BUSINESS MAY BE COMMENCED HAS
 BEEN EXTENDED BY THE SUPERINTENDENT. THE SUPERINTENDENT MAY GRANT ONE OR
 MORE SUCH EXTENSIONS UPON SATISFACTORY CAUSE BEING SHOWN. SUCH EXTENSION
 SHALL BE GRANTED BY ORDER EXECUTED, TRANSMITTED, AND FILED IN THE MANNER
 PROVIDED FOR AN AUTHORIZATION CERTIFICATE PURSUANT TO SUBDIVISION ONE OF
 THIS SECTION.
   § 157. APPLICATION TO COMMENCE OPERATION AS A  LIMITED  PURPOSE  TRUST
 COMPANY. 1. THE SUPERINTENDENT SHALL ESTABLISH BY REGULATION THE FORM OF
 AN  APPLICATION FOR ANY CORPORATE ENTITY TO OPERATE AS A LIMITED PURPOSE
 TRUST COMPANY, PROVIDED THAT SUCH ENTITY MEETS ALL OTHER REQUIREMENTS OF
 THIS ARTICLE.
   2. THE SUPERINTENDENT SHALL CONDUCT AN INVESTIGATION OF  THE  APPLICA-
 TION,  INCLUDING  AN  ASSESSMENT  OF  THE  CHARACTER  AND FITNESS OF THE
 MEMBERS OF THE BOARD OF DIRECTORS AND THE  MANAGEMENT  OF  THE  PROPOSED
 LIMITED PURPOSE TRUST COMPANY.
   3.  THE  NAME  OF  THE LIMITED PURPOSE TRUST COMPANY SHALL CONTAIN THE
 WORDS "TRUST COMPANY" AS PART OF ITS CORPORATE NAME AND ANY DOING  BUSI-
 NESS  AS DESIGNATION FILED WITH THE DEPARTMENT. THE SUPERINTENDENT SHALL
 BE AUTHORIZED TO  ESTABLISH  OTHER  GUIDELINES  ON  THE  SUITABILITY  OF
 CERTAIN  NAMES  OF  LIMITED  PURPOSE  TRUST  COMPANIES, AND DEEMED TO BE
 NECESSARY AND APPROPRIATE.
   4. (A) ANY LIMITED PURPOSE TRUST COMPANY SHALL  BE  ORGANIZED  IN  THE
 STATE  OF NEW YORK, AND SHALL HAVE A BOARD OF DIRECTORS OF NO FEWER THAN
 THREE INDIVIDUALS. ANY MEMBER OF THE BOARD OF DIRECTORS SHALL BE SUBJECT
 TO A REVIEW OF THEIR CHARACTER AND FITNESS TO SERVE AS A MEMBER OF  SUCH
 BOARD.    SUCH LIMITED PURPOSE TRUST COMPANY SHALL DESIGNATE A PRESIDENT
 OR CHIEF EXECUTIVE OFFICER, A SECRETARY, AND  A  GENERAL  COUNSEL  WHICH
 SHALL  ALL  BE  SUBJECT  TO  REVIEW BY THE DEPARTMENT FOR SUITABILITY TO
 SERVE IN THEIR FIDUCIARY ROLES.
   (B) THE LIMITED PURPOSE TRUST  COMPANY  SHALL  DESCRIBE  ITS  INTENDED
 BUSINESS PLAN, INCLUDING THE TYPE OR TYPES OF FIDUCIARY ACTIVITIES TO BE
 UNDERTAKEN  AND WHETHER ANY TRUST ASSETS ARE TO BE OFFERED. SUCH LIMITED
 PURPOSE TRUST COMPANY SHALL PROVIDE A STATEMENT SUMMARIZING THE PROPOSED
 MARKET AND TARGET CUSTOMERS TO THE DEPARTMENT  FOR  APPROVAL,  INCLUDING
 FINANCIAL PROJECTIONS FOR THE FIRST THREE YEARS OF SUCH COMPANY'S OPERA-
 TION AND ALL RELEVANT ASSUMPTIONS UPON WHICH SUCH PROJECTIONS ARE BASED.
   5.  (A)  EACH  MEMBER  OF THE BOARD OF DIRECTORS AND MEMBERS OF SENIOR
 MANAGEMENT AND MAJOR SHAREHOLDERS SHALL PROVIDE FINGERPRINTS TO BE VERI-
 FIED AGAINST THE CRIMINAL HISTORY DATABASE MAINTAINED BY THE DIVISION OF
 CRIMINAL JUSTICE SERVICES.
   (B) EACH MEMBER OF THE BOARD OF  DIRECTORS,  MAJOR  SHAREHOLDERS,  AND
 MEMBERS  OF SENIOR MANAGEMENT THAT PROPOSES TO CONTRIBUTE CAPITAL TO THE
 LIMITED PURPOSE TRUST COMPANY BY PURCHASING STOCK OF SUCH TRUST  COMPANY
 SHALL SUBMIT FINANCIAL INFORMATION TO THE DEPARTMENT.
   (C)  AN  ORGANIZATION CHART SHALL BE INCLUDED IN AN APPLICATION TO THE
 DEPARTMENT TO OPERATE AS A LIMITED PURPOSE TRUST  COMPANY,  WHICH  SHALL
 OUTLINE  THE ROLES AND RESPONSIBILITIES OF THE SENIOR MANAGEMENT OF SUCH
 TRUST COMPANY.
 S. 8364                             3
 
   (D) THE DEPARTMENT SHALL DEVELOP  A  QUESTIONNAIRE  TO  DETERMINE  THE
 SUITABILITY  OF  ANY  INDIVIDUAL  TO  SERVE  AS A MEMBER OF THE BOARD OF
 DIRECTORS OR HOLD ANY OTHER KEY POSITION  IN  A  LIMITED  PURPOSE  TRUST
 COMPANY.
   (E)  THE PLAN OF OPERATIONS OF THE LIMITED PURPOSE TRUST COMPANY SHALL
 BE PROVIDED TO THE DEPARTMENT, WHICH SHALL INCLUDE THE OPERATING  PROCE-
 DURES  OF THE LEGAL, ACCOUNTING, INVESTMENT, AND RECORDKEEPING FUNCTIONS
 OF SUCH TRUST COMPANY AND INFORMATION  REGARDING  ANY  PLANS  TO  OBTAIN
 RELATED SERVICES FROM OUTSIDE SOURCES.
   (F)  (I)  MAJOR SHAREHOLDERS SHALL BE IDENTIFIED TO THE DEPARTMENT. IF
 AN INDIVIDUAL'S OWNERSHIP  INTEREST  CONSTITUTES  STATUTORY  CONTROL  BY
 CONSTITUTING TWENTY-FIVE PERCENT OR MORE OF THE PROPOSED LIMITED PURPOSE
 TRUST COMPANY'S CAPITAL STOCK, THEN CERTIFIED PUBLIC ACCOUNTANT-PREPARED
 AND  REVIEWED  FINANCIAL  STATEMENTS  MAY BE PROVIDED IN LIEU OF AUDITED
 FINANCIAL STATEMENTS. ANY CORPORATION,  OR  LIMITED  LIABILITY  COMPANY,
 WHICH  IS  A  MAJOR SHAREHOLDER, SHALL DISCLOSE THE INDIVIDUAL OWNERS OF
 SUCH ENTITY TO THE DEPARTMENT.
   (II) FOR THE PURPOSES OF THIS PARAGRAPH, A "MAJOR  SHAREHOLDER"  SHALL
 MEAN  ANY  INDIVIDUAL  OR CORPORATE ENTITY OWNING OR CONTROLLING TWENTY-
 FIVE PERCENT OR MORE OF THE PROPOSED TRUST COMPANY'S CAPITAL STOCK.
   (G) A LIMITED PURPOSE TRUST COMPANY SHALL PROVIDE EVIDENCE OF  MINIMUM
 PRIMARY  COVERAGE  OF ONE MILLION DOLLARS. A BOND OR OTHER SURETY MAY BE
 ACCEPTABLE, AT THE DISCRETION OF THE DEPARTMENT.
   (H) THE NUMBER OF SHARES TO BE ISSUED AND PAR VALUE  FOR  SUCH  SHARES
 SHALL  BE  INCLUDED  IN  AN  APPLICATION TO OPERATE AS A LIMITED PURPOSE
 TRUST COMPANY.
   (I) IF A TRUST COMPANY IS A SUBSIDIARY OF  ANOTHER  CORPORATE  ENTITY,
 THEN  A  DESCRIPTION  OF  THE  TYPE  OF BUSINESS CONDUCTED BY THE PARENT
 COMPANY, AND BIOGRAPHICAL INFORMATION ON EACH OF ITS OWNERS  AND  DIREC-
 TORS,  INCLUDING  ANY  ENTITIES  WHICH  HAVE OWNERSHIP INTERESTS OF FIVE
 PERCENT OR MORE OF SUCH PARENT COMPANY, SHALL BE PROVIDED TO THE DEPART-
 MENT.   AUDITED FINANCIAL STATEMENTS OF SUCH  PARENT  COMPANY  SHALL  BE
 PROVIDED  TO  THE  EXTENT THEY ARE AVAILABLE. A STIPULATION OF FINANCIAL
 SURETY MAY BE REQUIRED FROM SUCH LIMITED PURPOSE TRUST COMPANY  BY  SUCH
 PARENT COMPANY, IN AN AMOUNT TO BE DETERMINED BY THE SUPERINTENDENT.
   § 158. LIMITED PURPOSE TRUST COMPANY OPERATION. 1. ANY LIMITED PURPOSE
 TRUST COMPANY SHALL RECEIVE A CERTIFICATE OF AUTHORITY PRIOR TO OFFERING
 ANY FIDUCIARY SERVICES PURSUANT TO SECTION ONE HUNDRED FIFTY-SIX OF THIS
 ARTICLE.  ANY  TRANSFER  OF  THE  MAJORITY OF THE ASSETS OF SUCH LIMITED
 PURPOSE TRUST COMPANY, OR ANY MERGER, SHALL REQUIRE THE APPROVAL OF  THE
 SUPERINTENDENT.
   2. ANY LIMITED PURPOSE TRUST COMPANY SHALL SUBMIT ITS PLANS FOR INTER-
 NAL  AUDIT  AND CONTROL TO THE DEPARTMENT FOR APPROVAL. SUCH PLANS SHALL
 INCLUDE, BUT NOT BE LIMITED  TO,  A  POLICY  FOR  INTERNAL  CONTROLS,  A
 RELATIONSHIP  WITH  A  FULL-TIME  AUDITOR,  ENGAGEMENT  WITH A CERTIFIED
 PUBLIC ACCOUNTANCY FIRM FOR A PERIODIC EXTERNAL AUDIT,  AND  MAINTENANCE
 OF A CONFLICT-OF-INTEREST POLICY.
   3.  (A) ANY LIMITED PURPOSE TRUST COMPANY SHALL ESTABLISH POLICIES AND
 PROCEDURES FOR COMPLIANCE  WITH  THE  BANK  SECRECY  ACT,  AND  EXERCISE
 REASONABLE DILIGENCE REGARDING OPENING AND MAINTAINING EVERY ACCOUNT, IN
 ORDER  TO KNOW AND RETAIN THE ESSENTIAL FACTS CONCERNING EVERY CUSTOMER,
 AND THE AUTHORITY OF EACH PERSON ACTING ON BEHALF OF SUCH CUSTOMER.
   (B) (I) FOR  THE  PURPOSES  OF  THIS  SUBDIVISION,  "ESSENTIAL  FACTS"
 INCLUDE THOSE REQUIRED TO:
   (A) EFFECTIVELY SERVICE THE CUSTOMER'S ACCOUNT;
 S. 8364                             4
 
   (B)  ACT  IN ACCORDANCE WITH ANY SPECIAL HANDLING INSTRUCTIONS FOR THE
 ACCOUNT;
   (C)  UNDERSTAND  THE  AUTHORITY OF EACH PERSON ACTING ON BEHALF OF THE
 CUSTOMER; AND
   (D) COMPLY WITH APPLICABLE STATE AND FEDERAL LAWS AND REGULATIONS.
   (II) ANY CUSTOMER FOR  WHICH  A  LIMITED  PURPOSE  TRUST  COMPANY  HAS
 PERFORMED THE REASONABLE DILIGENCE REQUIRED PURSUANT TO SUBPARAGRAPH (I)
 OF THIS PARAGRAPH SHALL BE A KNOWN CUSTOMER OF SUCH TRUST COMPANY.
   4.  ANY LIMITED PURPOSE TRUST COMPANY SHALL DEVELOP AND MAINTAIN POLI-
 CIES AND PROCEDURES DESIGNED TO MONITOR AND PREVENT FRAUD AND MISMANAGE-
 MENT, WHICH SHALL INCLUDE INDEPENDENT ACCOUNTING, AUDITING,  AND  OPERA-
 TIONAL CONTROLS.
   5.  (A)  ANY  LIMITED PURPOSE TRUST COMPANY SHALL SEEK THE APPROVAL OF
 THE DEPARTMENT PRIOR TO OFFERING A MATERIALLY NEW PRODUCT,  SERVICE,  OR
 BUSINESS  TO  THE  PUBLIC,  AND  SHALL PROVIDE THE SUPERINTENDENT WITH A
 DESCRIPTION AND RISK ASSESSMENT OF THE  PROPOSED  PRODUCT,  SERVICE,  OR
 BUSINESS.
   (B)  THE  SUPERINTENDENT  SHALL PROMPTLY REVIEW A REQUEST BY A LIMITED
 PURPOSE TRUST COMPANY TO APPROVE A NEW  PRODUCT,  SERVICE,  OR  BUSINESS
 PROVIDED BY A LIMITED PURPOSE TRUST COMPANY PURSUANT TO PARAGRAPH (A) OF
 THIS  SUBDIVISION,  AND  APPROVE  OR  DISAPPROVE  SUCH PROPOSED PRODUCT,
 SERVICE, OR BUSINESS WITHIN ONE HUNDRED EIGHTY DAYS  OF  RECEIVING  SUCH
 REQUEST. AN APPLICATION SHALL BE PROMULGATED BY THE DEPARTMENT TO FACIL-
 ITATE  SUCH  REQUESTS.  ANY  DENIAL  OF  SUCH  REQUEST FOR APPROVAL BY A
 PROPOSED TRUST COMPANY SHALL BE REVIEWABLE  UPON  APPLICATION  BEFORE  A
 JUDGE IN A COURT OF COMPETENT JURISDICTION. ANY REQUEST TO APPROVE A NEW
 PRODUCT, SERVICE, OR BUSINESS MADE PURSUANT TO THIS SUBDIVISION WHICH IS
 NOT  APPROVED  OR  DISAPPROVED  BY THE SUPERINTENDENT WITHIN ONE HUNDRED
 EIGHTY DAYS OF RECEIPT OF SUCH REQUEST SHALL BE DEEMED APPROVED.
   (C) PROVIDED THAT A REQUEST BY A LIMITED  PURPOSE  TRUST  COMPANY  FOR
 APPROVAL  OF A NEW PRODUCT, SERVICE, OR BUSINESS HAS BEEN GRANTED BY THE
 SUPERINTENDENT OR DEEMED APPROVED, NO FURTHER APPROVAL  IS  REQUIRED  TO
 PROVIDE  THE SAME PRODUCT, SERVICE, OR BUSINESS TO ADDITIONAL CUSTOMERS,
 WHETHER SUCH CUSTOMERS RESIDE IN OR OUTSIDE OF NEW YORK STATE.
   § 159. SPECIAL PROVISIONS RELATING TO  DIGITAL  ASSETS.  1.  (A)  EACH
 LIMITED  PURPOSE  TRUST  COMPANY  SHALL  BE REQUIRED TO MAINTAIN DIGITAL
 CURRENCY IN AN AMOUNT AND FORM AS THE SUPERINTENDENT DEEMS NECESSARY AND
 APPROPRIATE TO ENSURE THE FINANCIAL INTEGRITY AND ONGOING OPERATIONS  OF
 SUCH  TRUST  COMPANY,  AS  BASED  ON AN ASSESSMENT OF THE SPECIFIC RISKS
 APPLICABLE TO EACH  SUCH  TRUST  COMPANY,  INCLUDING  OPERATIONAL  RISK,
 LIQUIDITY RISK, AND MANAGEMENT RISK.
   (B)  THE  AMOUNTS OF DIGITAL CURRENCY MAY BE HELD BY A LIMITED PURPOSE
 TRUST COMPANY IN THE FORM OF: CASH, VIRTUAL CURRENCY,  PRECIOUS  METALS,
 OR  OTHER  HIGH QUALITY, HIGHLY LIQUID, INVESTMENT GRADE ASSETS, IN SUCH
 PROPORTIONS AS THE SUPERINTENDENT DEEMS APPROPRIATE.
   (C) AN ASSET HELD IN TRUST FOR A CUSTOMER BY A LIMITED  PURPOSE  TRUST
 COMPANY,  OR  A  STABLECOIN, IF IT IS ISSUED PURSUANT TO THE SUPERINTEN-
 DENT'S APPROVAL AND REGULATORY REQUIREMENTS, SHALL NOT BE REQUIRED TO BE
 SEPARATELY CAPITALIZED BY SUCH TRUST COMPANY.
   2. IT SHALL BE PROHIBITED FOR ANY LIMITED PURPOSE TRUST COMPANY TO ACT
 AS, EMPLOY, OR OTHERWISE USE THE SERVICES  OF  ANY  PROPRIETARY  TRADING
 AGENT  IN  VIOLATION  OF  ITS FIDUCIARY OBLIGATIONS TO ITS CUSTOMERS. NO
 LIMITED PURPOSE TRUST COMPANY SHALL ENGAGE IN ACTIVITY WHICH CONSTITUTES
 PREARRANGED TRADING, WASH TRADING, MARKET MANIPULATION, OR INSIDER TRAD-
 ING.
 S. 8364                             5
 
   3. (A) FOR THE PURPOSES OF THIS ARTICLE, AN ASSET HELD IN TRUST  BY  A
 LIMITED PURPOSE TRUST COMPANY SHALL INCLUDE ANY DIGITAL ASSET WHICH IS A
 STABLECOIN  BACKED  BY  UNITED  STATES DOLLARS, OR AN ASSET-BACKED TOKEN
 WHICH IS A TOKEN FOR WHICH A FIXED UNIT OF AN UNDERLYING ASSET  IS  HELD
 BY  SUCH TRUST COMPANY. TO QUALIFY AS A STABLECOIN, A RATIO EQUAL TO 1.0
 OR GREATER IN CASH OR CASH EQUIVALENT MUST BE MAINTAINED AND THE  ISSUER
 SHALL MANAGE ANY LIQUIDITY RISK THEREIN.
   (B)  FOR  THE  PURPOSES  OF  THIS SUBDIVISION, "CASH EQUIVALENT" SHALL
 MEAN:
   (I) U.S. TREASURY BILLS ACQUIRED BY THE ISSUER THREE  MONTHS  OR  LESS
 FROM THE RESPECTIVE MATURITIES OF SUCH U.S. TREASURY BILLS;
   (II) REVERSE REPURCHASE AGREEMENTS FULLY COLLATERALIZED BY U.S. TREAS-
 URY  BILLS,  U.S. TREASURY NOTES, AND/OR U.S. TREASURY BONDS ON AN OVER-
 NIGHT BASIS, SUBJECT TO DEPARTMENT REQUIREMENTS CONCERNING OVERCOLLATER-
 ALIZATION. SUCH  REVERSE  REPURCHASE  AGREEMENTS  SHALL  BE  EITHER  (A)
 TRI-PARTY OR (B) BILATERAL WITH A COUNTERPARTY THAT THE ISSUER HAS FOUND
 TO  BE  ADEQUATELY CREDITWORTHY AND WHOSE IDENTITY HAS BEEN SUBMITTED TO
 THE DEPARTMENT IN WRITING, WITHOUT OBJECTION, TOGETHER WITH THE ISSUER'S
 CREDIT ASSESSMENT, AT LEAST FOURTEEN DAYS PRIOR TO THE COMMENCEMENT OF A
 CONTRACT BETWEEN SUCH ISSUER AND SUCH COUNTERPARTY;
   (III) U.S. GOVERNMENT MONEY-MARKET FUNDS, SUBJECT TO  DEPARTMENT  CAPS
 ON  THE  FRACTION OF RESERVE ASSETS TO BE HELD IN SUCH FUNDS AND DEPART-
 MENT RESTRICTIONS ON SUCH FUNDS, WHICH MAY INCLUDE,  BUT  SHALL  NOT  BE
 LIMITED TO, A MINIMUM PERCENTAGE ALLOCATION TO DIRECT OBLIGATIONS OF THE
 U.S.   GOVERNMENT AND REVERSE REPURCHASE AGREEMENTS ON SUCH OBLIGATIONS;
 OR
   (IV) DEPOSIT ACCOUNTS AT U.S. STATE OR FEDERALLY CHARTERED  DEPOSITORY
 INSTITUTIONS,  SUBJECT TO DEPARTMENT RESTRICTIONS WHICH MAY INCLUDE, BUT
 SHALL NOT BE LIMITED TO, (A) PERCENTAGE-OF-RESERVE  OR  ABSOLUTE-DOLLAR-
 VALUE  CAPS ON THE ASSETS TO BE DEPOSITED AT ANY GIVEN DEPOSITORY INSTI-
 TUTION  AND  (B)  LIMITATIONS  BASED  ON  THE  DEPARTMENT'S  CONCLUSIONS
 CONCERNING  THE  RISK  CHARACTERISTICS  OF  PARTICULAR DEPOSITORY INSTI-
 TUTIONS, WHICH SHALL TAKE  INTO  CONSIDERATION  THE  AMOUNTS  REASONABLY
 NECESSARY  TO BE HELD AT DEPOSITORY INSTITUTIONS IN ORDER TO MEET ANTIC-
 IPATED REDEMPTION DEMANDS.
   (C) IN ORDER TO QUALIFY AS AN ASSET-BACKED TOKEN, EACH UNIT OF DIGITAL
 CURRENCY MUST BE BACKED BY A FIXED UNIT OF AN UNDERLYING ASSET WHICH  IS
 HELD  BY  A  LIMITED  PURPOSE  TRUST  COMPANY. SUCH UNDERLYING ASSET MAY
 INCLUDE, BUT SHALL NOT BE LIMITED TO, PRECIOUS  METALS  OR  CURRENCY  OF
 ANOTHER COUNTRY.
   (D)  STABLECOINS  AND  ASSET-BACKED  TOKENS  HELD BY A LIMITED PURPOSE
 TRUST COMPANY SHALL BE REDEEMABLE WITHIN TWO FULL  BUSINESS  DAYS  OF  A
 TIMELY REQUEST FROM A DEPOSITOR.
   (E)  A CERTIFIED PUBLIC ACCOUNTANT SHALL AUDIT THE ACCOUNT RESERVES OF
 ANY LIMITED PURPOSE TRUST COMPANY ON A MONTHLY BASIS AND VERIFY THAT THE
 REQUIRED PROPORTION OF ASSETS AND SEGREGATION OF SUCH  ASSETS  IS  MAIN-
 TAINED.
   (F)  SUCH  RESERVED  AMOUNTS  HELD  BY A LIMITED PURPOSE TRUST COMPANY
 SHALL BE SUBJECT TO AN ANNUAL AUDIT FROM AN INDEPENDENT CERTIFIED PUBLIC
 ACCOUNTANT.
   (G) ANY DOCUMENTS RELATED TO SUCH RESERVES AND BACKING OF  ANY  ISSUED
 STABLECOIN OR ASSET-BACKED TOKEN HELD BY A LIMITED PURPOSE TRUST COMPANY
 SHALL BE PRODUCED UPON REQUEST BY THE DEPARTMENT.
   4.  (A)  UPON APPLICATION TO THE DEPARTMENT, ANY LIMITED PURPOSE TRUST
 COMPANY SHALL BE AUTHORIZED TO  ISSUE  ANY  STABLECOIN  OR  ASSET-BACKED
 TOKEN  WHICH  MEETS  THE  REGULATORY  REQUIREMENTS OF THIS ARTICLE. SUCH
 S. 8364                             6
 
 APPLICATION SHALL BE MADE IN A FORM AND MANNER TO BE PROSCRIBED  BY  THE
 DEPARTMENT.    THE  DEPARTMENT,  IN  EVALUATING  SUCH APPLICATION, SHALL
 AUTHORIZE LIMITED PURPOSE TRUST COMPANIES TO ISSUE ANY DIGITAL ASSET  IF
 SUCH TRUST COMPANY DEMONSTRATES TO THE DEPARTMENT THAT SUCH TRUST COMPA-
 NY HAS THE REQUISITE EXPERTISE, EXPERIENCE, AND CAPABILITY TO ISSUE SUCH
 STABLECOIN  OR ASSET-BACKED TOKEN IN A MANNER THAT WILL COMPORT WITH THE
 POLICY CONSIDERATIONS CONTAINED IN SECTION TEN OF THIS CHAPTER. FOR  ANY
 OTHER  ASSET-BACKED  TOKEN  ISSUANCE, THE SUPERINTENDENT SHALL SIMILARLY
 REVIEW AND APPROVE A LIMITED PURPOSE TRUST COMPANY TO ISSUE SUCH  ASSET-
 BACKED  TOKEN.  FOR  ANY  ISSUANCE AUTHORIZED PURSUANT TO THIS PARAGRAPH
 SUCH, THE SUPERINTENDENT SHALL CONDUCT A REVIEW OF  ANY  OFFERING  DOCU-
 MENTS, OR OTHER INFORMATION USED FOR MARKETING SUCH CURRENCY PRIOR TO IT
 BEING OFFERED TO ANY CONSUMER ENTITY.
   (B)  A  LIMITED PURPOSE TRUST COMPANY MAY LIST AND HOLD IN ITS CUSTODY
 ANY STABLECOIN OR ASSET-BACKED TOKEN MEETING THE REGULATORY REQUIREMENTS
 OF THIS ARTICLE UPON SUBMISSION TO THE DEPARTMENT OF A CERTIFICATION, ON
 A FORM TO BE PROVIDED BY THE DEPARTMENT FOR SUCH PURPOSE, PROVIDED  THAT
 THE  SUPERINTENDENT  HAS  REVIEWED  AND  APPROVED  THE  ISSUANCE OF SUCH
 STABLECOINS OR ASSET-BACKED TOKENS.
   (C) THE SUPERINTENDENT MAY, IN HIS OR HER DISCRETION, PLACE ANY VIRTU-
 AL CURRENCY ON A LIST OF ACCEPTED VIRTUAL  CURRENCIES,  WHICH  SHALL  BE
 PUBLISHED ON THE DEPARTMENT'S WEBSITE.
   (D)  ALL  APPLICATIONS BY A LIMITED PURPOSE TRUST COMPANY TO ISSUE ANY
 STABLECOIN OR ASSET-BACKED TOKEN SHALL BE FILED ON A FORM PRESCRIBED  BY
 THE  SUPERINTENDENT.  ANY  SUCH  APPLICATION SHALL BE EITHER APPROVED OR
 DISAPPROVED BY THE DEPARTMENT WITHIN ONE HUNDRED  EIGHTY  DAYS  OF  SUCH
 FILING.  IF  THE  DEPARTMENT HAS NOT DISAPPROVED SUCH APPLICATION WITHIN
 ONE HUNDRED EIGHTY DAYS OF SUCH FILING, IT SHALL BE DEEMED APPROVED. ANY
 DISAPPROVAL OF SUCH APPLICATION SHALL BE REVIEWABLE IN A COURT OF COMPE-
 TENT JURISDICTION.
   (E) PROVIDED THAT  A  LIMITED  PURPOSE  TRUST  COMPANY  IS  EXERCISING
 REASONABLE DILIGENCE IN ITS OPENING OF ACCOUNTS, AS REQUIRED BY SUBDIVI-
 SION  THREE  OF  SECTION  ONE  HUNDRED  FIFTY-EIGHT  OF THIS ARTICLE, NO
 FURTHER REVIEW OR APPROVAL SHALL BE REQUIRED FOR THE SALE OR TRANSFER OF
 ANY VIRTUAL CURRENCY TO ANY KNOWN CUSTOMER ONCE  SUCH  INITIAL  SALE  OR
 TRANSFER HAS BEEN APPROVED BY THE SUPERINTENDENT.
   (F)  ENCRYPTION  AND  DATA  PROTECTION  MEASURES  RELATIVE  TO VIRTUAL
 CURRENCY SHALL BE REVIEWED AND APPROVED BY THE DEPARTMENT AS PART OF THE
 DEPARTMENT'S REVIEW OF AN APPLICATION BY A LIMITED PURPOSE TRUST COMPANY
 TO ISSUE ANY STABLECOIN. THE DEPARTMENT  SHALL  PROMULGATE  REQUIREMENTS
 FOR  DATA PROTECTION AND ENCRYPTION STANDARDS RELATED TO VIRTUAL CURREN-
 CY.
   5. THE SUPERINTENDENT SHALL, WHERE IT HAS INVESTIGATED AND  DETERMINED
 THAT  THE  REQUIREMENTS OF ANOTHER STATE'S LAWS ARE SUBSTANTIALLY EQUIV-
 ALENT TO THOSE OF NEW YORK STATE, ACCEPT THE LICENSE OR APPROVAL OF  ANY
 DIGITAL ASSET OR VIRTUAL CURRENCY ISSUED BY SUCH OTHER STATE, OR AUTHOR-
 IZE THE DOING BUSINESS OF ANY LIMITED PURPOSE TRUST COMPANY FORMED UNDER
 A REGULATORY FRAMEWORK THAT IS SUBSTANTIALLY EQUIVALENT TO THIS ARTICLE.
   6.  (A)  CUSTOMERS  OF A LIMITED PURPOSE TRUST COMPANY SHALL BE RECOG-
 NIZED AS THE OWNERS OF FUNDS, DEPOSITS, AND ASSETS THEY HAVE  PLACED  IN
 CUSTODY  WITH  SUCH LIMITED PURPOSE TRUST COMPANY AND SUCH FUNDS, DEPOS-
 ITS, AND ASSETS SHALL  NOT  CONSTITUTE  THE  PROPERTY  OF  SUCH  LIMITED
 PURPOSE  TRUST  COMPANY  IN A BANKRUPTCY, RECEIVERSHIP, OR OTHER DISSOL-
 UTION, AS APPLICABLE.
 S. 8364                             7
 
   (B) THE SUPERINTENDENT MAY REVIEW A LIMITED  PURPOSE  TRUST  COMPANY'S
 USE  OF  CONTRACT  TERMS TO ENSURE COMPLIANCE WITH PARAGRAPH (A) OF THIS
 SUBDIVISION.
   (C)  ANY  LIMITED PURPOSE TRUST COMPANY SHALL DEVELOP WRITTEN POLICIES
 THAT ARE DESIGNED TO TRACK, TRACE, AND RETURN CUSTOMER FUNDS,  DEPOSITS,
 AND  ASSETS  TO  THEIR  PROPER  OWNER, INCLUDING, WHERE RELEVANT, TO THE
 HOLDERS OF RECORD, TO THE GREATEST EXTENT  POSSIBLE,  IN  THE  EVENT  OF
 BANKRUPTCY, RECEIVERSHIP, OR OTHER DISSOLUTION, AS APPLICABLE.
   §  2. Section 301 of the financial services law is amended by adding 2
 new subsections (d) and (e) to read as follows:
   (D) A VIOLATION OF ARTICLE TWENTY-TWO-A OF THE  GENERAL  BUSINESS  LAW
 SHALL  CONSTITUTE  A  VIOLATION  OF  THIS CHAPTER AND A VIOLATION OF THE
 BANKING LAW. NOTHING HEREIN SHALL  INFRINGE  ON  THE  AUTHORITY  OF  THE
 DEPARTMENT  OF  LAW  TO  INVESTIGATE  OR OVERSEE THE SALE OR TRANSFER OF
 SECURITIES AS PROVIDED IN ARTICLE TWENTY-ONE-A OF THE  GENERAL  BUSINESS
 LAW. AN ACTION SHALL NOT BE MAINTAINED AGAINST AN ENTITY REGULATED UNDER
 THE  BANKING  LAW BY THE ATTORNEY GENERAL UNLESS REFERRED THERETO BY THE
 SUPERINTENDENT.
   (E) ANY OUT OF STATE ENTITY WHICH HAS BEEN GRANTED  RECIPROCITY  UNDER
 THIS  PROVISION  SHALL REMAIN IN GOOD STANDING AT ALL TIMES IN ITS STATE
 OF LICENSURE. ANY SUSPENSION, REVOCATION OR TERMINATION OF  SUCH  LICEN-
 SURE  SHALL  APPLY  AS  IF  LEVIED IN NEW YORK STATE. THE SUPERINTENDENT
 SHALL ISSUE REGULATIONS TO IMPLEMENT THE PROVISIONS OF THIS SUBSECTION.
   § 3. The opening paragraph of subdivision 1  of  section  9-c  of  the
 banking  law, as added by chapter 849 of the laws of 1964, is amended to
 read as follows:
   The superintendent or the attorney-general may bring an action for the
 dissolution of a corporation formed under any article of this chapter or
 formed under any other statute or special act having as its  purpose  or
 among  its  purposes  a  purpose  for  which a corporation, EXCEPT FOR A
 LIMITED PURPOSE TRUST COMPANY FORMED PURSUANT TO  ARTICLE  3-C  OF  THIS
 CHAPTER,  may  be  formed  under  this  chapter  upon one or more of the
 following grounds:
   § 4. Section 606 of the banking law is amended by adding a new  subdi-
 vision 7 to read as follows:
   7.  FOR  THE  PURPOSES  OF  THIS SECTION, THE SUPERINTENDENT SHALL NOT
 LIQUIDATE THE TRUST ASSETS OF A  LIMITED  PURPOSE  TRUST  COMPANY  WHICH
 HOLDS  AMOUNTS  IN  RESERVE FOR AN ASSET-BACKED TOKEN, INCLUDING STABLE-
 COIN, BEFORE MAKING A DETERMINATION OF WHETHER SUCH  AMOUNTS  ARE  SAFE-
 GUARDED  FROM FRAUD, WASTE, OR ABUSE. IF SUCH AMOUNTS ARE NOT DETERMINED
 TO BE AT RISK, SUCH AMOUNTS MAY CONTINUE TO BE HELD IN THE NAME  OF  THE
 SUPERINTENDENT,  OR  A RECEIVER DEEMED APPROPRIATE BY THE SUPERINTENDENT
 TO ADMINISTER SUCH AMOUNTS, AND SUCH FUNDS SHALL NOT BE MADE A  PART  OF
 ANY  ESTATE  IN  BANKRUPTCY.  ANY CUSTOMER OF SUCH LIMITED PURPOSE TRUST
 COMPANY SHALL BE ABLE TO TRANSFER THE AMOUNT HELD  IN  TRUST  OR  REDEEM
 SUCH  AMOUNTS  OF A STABLECOIN OR ASSET-BACKED TOKEN AS THEY DEEM APPRO-
 PRIATE.   NOTWITHSTANDING THE PROVISIONS OF  THIS  SUBDIVISION,  NOTHING
 HEREIN SHALL PREVENT THE SUPERINTENDENT FROM PROCEEDING AGAINST ACCOUNTS
 AND  PROPERTY NOT HELD IN TRUST. THE ACCOUNTING TREATMENT OF THE AMOUNTS
 HELD IN SUCH ACCOUNTS SHALL NOT BE DETERMINATIVE OF WHETHER SUCH AMOUNTS
 ARE FIDUCIARY ASSETS.
   § 5. Subdivision 1 of section 617 of the banking law,  as  amended  by
 chapter 259 of the laws of 1986, is amended to read as follows:
   1.  The superintendent may, after he has taken possession of any bank-
 ing organization, cause to be mailed to each person claiming to  be,  or
 appearing upon the books of such banking organization to be
 S. 8364                             8
 
   (1) the owner of any personal property in the custody or possession of
 such banking organization as bailee or depositary for hire or otherwise,
 including  the contents of any safe, vault or box theretofore opened for
 non-payment of rental in accordance with the provisions of this chapter,
 WHICH  SHALL INCLUDE ANY AMOUNTS HELD IN TRUST FOR A CUSTOMER, INCLUDING
 A STABLECOIN ISSUED OR HELD AND OTHER TRUST ASSETS  HELD  BY  A  LIMITED
 PURPOSE TRUST COMPANY, or
   (2) the lessee of any safe, vault or box, a notice in writing directed
 by  registered  mail  to  such  person  at  his last address as the same
 appears on the books of such banking organization or at his  last  known
 address  if  no  address appears on such books, notifying such person to
 remove all such property or the contents of any such safe, vault or box,
 within a period stated in said notice, which period shall  be  not  less
 than sixty days from the date of such notice, and further notifying such
 person  of  the  terms  and  provisions of this section. The contract of
 bailment or of deposit for hire, or lease of safe, vault or box, if any,
 between the person to whom such notice is mailed and such banking organ-
 ization shall cease and determine upon the date  for  removal  fixed  in
 such  notice. Such person shall have a claim against such banking organ-
 ization for the amount of the unearned rent or charges, if any, paid  by
 such  person  from  the  date  fixed  in such notice, if the property or
 contents is removed on or before such date, or from the date  of  actual
 removal, if the property or contents is removed after such date.
   As  used  herein  the  phrase  "personal  property  in  the custody or
 possession of such banking organization as bailee or depositary for hire
 or otherwise" shall include,  without  limitation,  securities,  whether
 held in custody directly or in book-entry form by such banking organiza-
 tion, its nominee, subcustodian, clearing corporation or similar entity,
 AND ANY TRUST ASSETS HELD BY A LIMITED PURPOSE TRUST COMPANY.
   § 6. This act shall take effect on the one hundred eightieth day after
 it  shall have become a law. Effective immediately, the addition, amend-
 ment and/or repeal of any rule or regulation necessary for the implemen-
 tation of this act on its effective date are authorized to be  made  and
 completed on or before such effective date.