NY State Comptroller Raises Concerns Over Handling of BitLicense by NYDFS
Summary:
New York State Comptroller Thomas P. DiNapoli has expressed apprehension regarding the handling of BitLicense by the New York State Department of Financial Services (NYDFS). His concern stems from a lack of thoroughness in security checks of potential licensees and a delay in the NYDFS's mandated biennial financial assessments of the licensees' businesses. DiNapoli suggests the creation of formal procedures for tracking follow-ups to audits, a protocol the NYDFS reports it has already begun to implement.
The State Comptroller of New York, Thomas P. DiNapoli, expressed apprehension over how the New York State Department of Financial Services (NYDFS) is handling BitLicense. In his report from January about the licensing of virtual currencies in the state, DiNapoli characterized his trust in the NYDFS’s ability to adequately oversee BitLicense as “limited”. The NYDFS’s role includes supervising other financial bodies within the state.
DiNapoli underscored an insufficiency in the depth of security checks undertaken for potential licensees. For instance, the investigations his team conducted found that out of eight applicants chosen randomly, two did not fully finish the fingerprinting process prior to being granted approval. Furthermore, the NYDFS was unable to confirm that it had verified applicants’ records of meeting tax obligations or verified proof of minimum net worth.
Related to this, the Comptroller’s team found a three-year lapse between mandated twice-yearly assessments of the licensees' financial stability and the health of their businesses, which should be carried out by the NYDFS. In certain instances, as much as four years lapsed between the submission of anti-money laundering (AML) documentation by companies and the granting of BitLicense. This implies that those documents are likely no longer up-to-date.
DiNapoli advocates for the establishment of formal procedures to manage the follow-up process after examinations. The NYDFS has responded in a document, stating it has noticed this “area for improvement” and adopted a template for tracking examination follow-ups. In April 2023, it initiated a procedure for tracking BitLicense Examination Findings. However, DiNapoli notes, out of eight randomly selected licensees, the NYDFS only provided a tracking note for one.
Cryptocurrency companies doing business in New York have had to apply for a BitLicense through the NYDFS since 2015. At present, 32 regulated entities are on the list of license holders, including names like BitPay, Circle, Coinbase, Gemini, Paxos, and PayPal. Additional comments have been sought from the Comptroller’s office by Cointelegraph. The Magazine: Which gaming guild has set itself up most effectively for the bull market?
Published At
1/9/2024 2:53:30 PM
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