Cryptocurrency Fraud Guidelines Issued By New York’s Financial Regulator

Announcements, News, Regulation | February 8, 2018 By:

The New York State Department of Financial Services (NYDFS) has issued guidance reminding all companies that offer cryptocurrency services in the state that they are required to strengthen their protective measures against fraud and market manipulation.

In the guidance issued on Wednesday, cryptocurrency firms are required to implement written policies that evaluate “the full range of fraud-related and similar risk areas,” including market manipulation, in addition to providing procedures and controls to safeguard consumers and investors from these risks.

Immediately upon discovering any wrongdoing, a cryptocurrency entity must submit a report stating all pertinent details known at the time of the report. Cryptocurrency firms must also submit, as soon as practicable, a further report or reports of any material developments relating to the originally reported events.

“DFS took the lead in 2015 in regulating the virtual currency market, and we continue to be vigilant concerning risks in these markets,” said Superintendent Maria T. Vullo. “Market manipulation presents serious risks, both to consumers and to the safety and soundness of financial services institutions. As the cryptocurrency markets continue to evolve, DFS is directing virtual currency companies to take the necessary steps to guard against fraud, and to be extra vigilant about manipulation. By these actions, the market can evolve with strong regulatory supervision.”

On July 17, 2014, the department released details on a proposed “bitLicense,” which places regulations on any company or person that uses cryptocurrencies residing in New York. It came into effect on August 8, 2015. According to the NYDFS, it has approved six firms for virtual currency charters or licenses, while denying those applications that did not meet the department’s standards. NYDFS has granted licenses to bitFlyer USA, Coinbase, XRP II and Circle Internet Financial, and charters to Gemini Trust Company and itBit Trust Company.