Thomas DiNapoli, New York State comptroller, didn’t hold back when he delved into state oversight of crypto companies.
“We found there is limited assurance that [Department of Financial Services] is adequately performing its oversight responsibilities related to the application for and supervision of BitLicenses in the state,” According to the report,
BitLicense, launched by NYDFS on June 15, 2015, is a program that aims to give New Yorkers regulated access to digital currencies.
This is the source of concern for the Comptroller “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.”
Some applicants failed to complete all the steps required for background checks by the state. Of the 8 applicants who applied, two failed to submit their fingerprints. This meant that the Department could not complete background checks. “major shareholders and officers prior to application approval.”
In addition, the Comptroller’s Report found that BitLicensees’ cybersecurity systems were not up to scratch. “were not in compliance” DFS regulations. The DFS failed to submit quarterly and annually financial statements in respect of the BitLicenses, which were assessed by Comptroller’s Office.
In the report it is stated that both the annual and quarterly reports must be reviewed by the Supervision team to verify compliance.
The report recommends that DFS implement a proper follow-up procedure to combat concerns raised by the comptroller.
NYDFS Superintendent Adrienne Harris has announced the VOLT Initiative, which aims at improving the oversight of crypto companies by the financial regulator. VOLT stands as vision, operations and leadership technology.
The audit spanned a period of several years between July 2018 and July 2023.
BitLicense was introduced in 2015. It certifies companies that engage in crypto activity, including selling, issuing and distributing digital assets. In addition to BitLicenses and New York Banking Law charters, crypto companies can apply for BitLicenses or a charter that would permit them to engage in some crypto activities.
The NYDFS published a proposal earlier this year that changed the guidelines for listing coins, and required companies to implement a delisting procedure.
Harris announced several actions against crypto-companies operating in the State. In January of last year, DFS settled a $100-million settlement with Coinbase for failing to comply with the DFS’s compliance check.
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