NY State's Comptroller Slams Crypto BitLicense Oversight

• An Evaluation of DFS' Crypto Oversight Through BitLicense Program
• Recommendations from the Comptroller's Office
• DFS' Commitment to Strengthen Regulatory Efforts
• Accusations Against DFS' Regulatory Measures
• Concerns from Other Regulatory Bodies

An Evaluation of DFS' Crypto Oversight Through BitLicense Program

The New York Department of Financial Services (DFS) has received criticism concerning its supervision of cryptocurrency activities through its BitLicense program, as revealed by an examination by New York State Comptroller Thomas DiNapoli. The regulator's dependence on inconsistent, out-of-date, and occasionally absent background data on its digital currency license holders during their application process was found to be inadequate.

Recommendations from the Comptroller's Office

The audit report suggested that the DFS should improve its process to ensure applications are thorough and the assessments are punctual. It was noted by DiNapoli's office that throughout the audit period, adequate policies and procedures were absent to assure appropriate DFS oversight of virtual currency license applications, supervision, and examination. However, the DFS responded by assuring that the issues identified in the draft report have been addressed and were present before the current leadership's tenure.

DFS' Commitment to Strengthen Regulatory Efforts

Over the past two years, DFS has established itself as the leading regulator of digital currencies in the United States and remains dedicated to reinforcing its regulatory efforts, as mentioned in the DFS' response in the audit report. No further comments were made by an agency spokesperson.

Accusations Against DFS' Regulatory Measures

The audit report accused DFS-the only U.S. regulator with comprehensive rules for conducting crypto business-of shortcomings in several areas. These include gaps in fingerprint information, lack of background on applicants' tax obligations, long delays between risk assessments on applicants and their subsequent approvals, lack of financial details, and inadequate cybersecurity compliance from BitLicense holders. The report also noted that the current DFS administration's tenure predates many of these findings and that several problems have not been resolved.

Concerns from Other Regulatory Bodies

Suspicion regarding DFS's sufficiency in overseeing the crypto industry is also shared by another New York regulator, the state Attorney General's Office. The NYAG questioned the financial watchdog's capability and took legal action against a BitLicense recipient, advocating for legislation granting it enhanced oversight in the previous year.

Edited by Jonathan Stoker