April 13, 2024

New York’s Cryptocurrency Oversight Under Scrutiny

The New York State Comptroller’s office has raised concerns over potential deficiencies in the Department of Financial Services’ (DFS) oversight of the cryptocurrency industry. 

In a report released earlier this month, the comptroller highlighted risks stemming from the DFS’ BitLicense program, which requires crypto firms to obtain a state license. The report questioned whether the DFS thoroughly vets applicants and continuously monitors licensees’ financial stability and cybersecurity.

A key worry is the four-year lag between license applicants submitting anti-money laundering risk assessments and approvals. This delay leaves open the possibility that outdated information guides licensing decisions. 

Additionally, the report doubted existing licensees’ cybersecurity credentials, given the industry’s vulnerability to theft and fraud. Although the DFS updated cyber standards last November, the comptroller urged further action to address identified shortcomings and ensure timely safety examinations. 

“We found there is limited assurance that DFS is adequately performing oversight related to BitLicenses, creating the risk that licenses could be granted without verifying financial stability or that businesses may not maintain standards once licensed,” the report summary stated.

The BitLicense is considered one of the toughest state virtual currency regulations. However, the comptroller emphasized the need for constant monitoring of licensees’ practices to address the identified gaps. With cryptocurrency oversight in the national spotlight, the report calls into question New York’s ability to serve as an effective industry watchdog.

Also read: Standard Chartered Sees $50-100B Boost in Bitcoin ETFs

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