May 29, 2024
Critical Review of New York's BitLicense Oversight
Latest Cryptocurrency News

Critical Review of New York’s BitLicense Oversight

New York State Comptroller Thomas DiNapoli has expressed concerns regarding the management of BitLicense by the New York Department of Financial Services (NYDFS). In a January report on digital currency licensing in the state, DiNapoli conveyed only “limited assurance” in the NYDFS’s oversight of BitLicense, which also extends to other financial authorities in the state.

DiNapoli highlighted deficiencies in security checks for potential licensees, citing instances where two out of eight sampled applicants did not complete the fingerprinting process before gaining approval. The NYDFS was also found lacking in verifying applicants’ tax obligations and minimum net worth documentation.

The Comptroller’s office discovered a significant gap, up to three years, between supposedly biennial examinations of licensees’ financial conditions and the soundness of their businesses, a duty assigned to the NYDFS. Additionally, there were cases where four years passed between the submission of Anti-Money Laundering documents and the issuance of a BitLicense, rendering the documents likely outdated.

DiNapoli recommended the establishment of formal procedures for the examination follow-up process. The NYDFS responded, acknowledging the need for improvement and stating the implementation of a BitLicense Examination Findings Tracking Procedure in April 2023. However, the Comptroller observed that the NYDFS provided tracking for only one of the eight sampled licensees.

Since 2015, crypto firms operating in New York must apply for a BitLicense through the NYDFS. The current list of 32 regulated entities includes industry players like BitPay, Circle, Coinbase, Gemini, Paxos, and PayPal. DiNapoli’s report raises questions about the effectiveness of the oversight process for BitLicense and emphasizes the need for improvements in security checks and examination procedures to ensure robust regulatory practices in the cryptocurrency space.

Photo by Pixabay

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