BitLicense oversight in New York faces critical review

    2024.01.09 | exchangesranking | 140onlookers

    The New York State Comptroller Thomas DiNapoli has revealed his concerns over the New York Department of Financial Services (NYDFS) management of BitLicense.

    In a January report on digital currency licensing in the state, DiNapoli expressed only a “limited assurance” that the NYDFS adequately performs its oversight responsibilities regarding BitLicense. The NYDFS is also tasked with overseeing other financial authorities in the state.

    DiNapoli pointed out a lack of thoroughness regarding a range of security checks of the potential licensees. For example, his team’s investigation showed that two out of eight sampled applicants didn’t fully complete the fingerprinting process before application approval.

    The NYDFS has also failed to provide proof of verifying applicants’ tax obligations or minimum net worth documentation.

    Related: NYDFS calls for public feedback on proposed crypto regulatory guidance

    The Office of the Comptroller also discovered a three-year gap between supposedly biennial examinations of the licensee’s financial condition and the soundness of its businesses, which the NYDFS must conduct. In some cases, four years have passed between submitting Anti-Money Laundering documents from the companies and granting a BitLicense, which means those documents were most likely now outdated.

    DiNapoli recommends establishing formal procedures “for the examination follow-up process.”

    The document also contains the NYDFS’s reaction to the audit, stating that the department has already identified this “area for improvement” and adopted a template to track follow-ups on examination findings.

    In April 2023, it implemented a BitLicense Examination Findings Tracking Procedure for these purposes. However, the Comptroller notes that the NYDFS provided a tracking note for only one licensee of the eight sampled.

    Crypto firms operating in New York have been required to apply for a BitLicense through the NYDFS since 2015. Currently, the list of licensees includes 32 regulated entities, with BitPay, Circle, Coinbase, Gemini, Paxos and PayPal among them.

    Cointelegraph has reached out to the Comptroller’s office for further comments.

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