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New York State Comptroller Raises Concerns About Crypto-Focused BitLicense Program

cryptocurrency

The Office of the New York State Comptroller raised concerns about the Department of Financial Services’ oversight of the cryptocurrency industry.

The office released a report earlier this month that highlighted potential risks associated with the state’s BitLicense program, which requires digital asset providers to obtain a license from the DFS, according to a summary of key findings.

The report questioned the thoroughness and effectiveness of the program, particularly in granting licenses to applicants lacking financial stability and cybersecurity standards, per the summary.

The DFS did not immediately reply to PYMNTS’ request for comment.

One major concern raised by the comptroller’s office is a delay in granting BitLicenses, the summary said. There is a four-year lag between an applicant’s submission of anti-money laundering (AML) risk assessments and the approval of licenses. This delay raises the possibility of outdated information being used in the licensing process.

Additionally, the report expressed doubts about the cybersecurity credentials of existing licensees, considering the industry’s susceptibility to theft and scams, per the summary.

The DFS updated its cybersecurity standards for all entities under its regulatory purview in November, Bloomberg reported Monday (Jan. 8). However, the comptroller’s office’s report called for further action to address the identified deficiencies and ensure timely safety and soundness examinations. The comptroller’s office emphasized the need for continuous monitoring and evaluation of licensees’ cybersecurity practices.

“We found there is limited assurance that DFS is adequately performing its oversight responsibilities related to the application for and supervision of BitLicenses in the State, creating the risk that licenses could be granted to applicants whose financial stability has not been thoroughly verified or that, once licensed, businesses may not maintain financial or cybersecurity standards,” the summary stated.

The New York DFS is one of the toughest and most-respected regulators of virtual currency in the United States, PYMNTS reported in 2022. The state’s BitLicense has been seen as both the gold standard in the regulation of cryptocurrency businesses in the country and a regime so tough many legitimate companies fled the state and won’t do business with New Yorkers.

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