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10/01/24
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New York DFS Reportedly Not Handling BitLicense Oversight Responsibility as Expected
The New York Department of Financial Services (DFS) in the U.S. has released a report on virtual currency licensing with the aim of determining whether DFS is providing adequate oversight to ensure that virtual currency licensees comply with the rules, regulations, and codes of the state.
The regulation of virtual currency was established in 2015, requiring entities interested in carrying out business activities related to virtual currency to obtain a license called BitLicense from DFS.
According to the report, the assurance that DFS is adequately carrying out its oversight responsibilities related to the application for and supervision of BitLicenses in the State is limited. Hence, this may lead to the department granting licenses to entities whose financial stability has not been thoroughly verified or those who may not maintain financial or cybersecurity standards if offered a license.
The conclusion was based on several operational lapses, including not fully completing the fingerprinting process used for the assessment of the backgrounds of applicants’ major shareholders and officers before approving their application.
“We discovered lags between the submission of required anti-money laundering risk assessments and the granting of licenses — with one application approval coming nearly 4 years after the assessment — creating the possibility that outdated information could be used to approve BitLicenses,” reads the report.
Furthermore, it was discovered that DFS did not provide documentary evidence of adequate verification of applicants’ tax obligations, could not document the use of a website to search for tax warrants for the review of BitLicense applicants, and more.
Thirty-two (32) entities are currently on the list of regulated firms in the state, including PayPal, Paxos, Gemini, BitPay, Circle, Coinbase and others.
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