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The New York Department of Financial Services has rejected the Bittrex Cryptocurrency Exchange’s application for BitLicense, citing inadequate Anti Money Laundering Policies and Know Your Customer requirements.
Over-regulation and control have always been the arch-enemies of the new emerging decentralized technology. Cryptocurrencies by design allow anyone to move digital assets and value to anywhere in the world without going through any of the standardized institutional processes put in place to keep track of such activity.
This ability of cryptocurrencies agitates government bodies and attracts the attention of a plethora of criminals. Money laundering, payment for illegal activities and drugs, and anonymous transfer of funds have been some of the most lucrative and yet difficult-to-obtain goals for criminals until cryptocurrencies and blockchain technology came along.
In a similar manner, the New York Department of Financial Services has rejected Bittrex’s BitLicense application. In a letter by the department, the NY regulator put forward several factors that forced this decision.
Daniel Sangeap, deputy superintendent and deputy counsel at NYDFS, noted in the letter that the NYDFS worked steadily with Bittrex to address the concerns regarding their policies and help them “in developing appropriate controls and compliance programs commensurate with the evolving nature of the sector.” Furthermore, Sangeap wrote, the department sent issued several deficiency letters. The letters required Bittrex to address its anti-money laundering procedures, Office of Foreign Assets Control compliance and its coin listing process.
Among the gravest concerns raised by the regulator were inadequate or non-existent anti-money laundering procedures, the ineffectiveness of the compliance officer, a flawed OFAC screening process, a lack of customer due diligence and a lack of due diligence in launching new tokens and products.
In a public statement, Bittrex has rebuffs all of the claims by the NYDFS. In response to the complaint by the department that Bittrex allowed accounts with clearly misspelled or intentionally misleading names, the statement by Bittrex claims that the regulator’s sample came from 2017 and that the exchange has since tightened up their security measures.
The Department of Financial Services has given no indication that it would consider changing its position, which means that Bittrex has 14 days to confirm to the department that it has ceased doing business in New York. Within 60 days, Bittrex is to finish processing any remaining positions or transactions.
While there is not an option to appeal against the rejection, Bittrex can still reapply for the BitLicense later on.