New York Financial Regulator Denies Crypto Exchange Bittrex’s BitLicense Application

News, Regulation | April 12, 2019 By:

The New York State Department of Financial Services (NYDFS) has rejected the application of crypto exchange Bittrex to engage in virtual currency business and money transmission activity in the state.

In a press release, the NYDFS said that Bittrex failed to meet the licensing requirements of the agency, primarily due to deficiencies in Bittrex’s BSA/AML/OFAC compliance program, deficiency in meeting the Department’s capital requirement, and deficient due diligence and control over Bittrex’s token and product launches.

“Based on the Department’s extensive review of the information submitted and the Department’s recent review of Bittrex’s operations, the Department hereby denies the applications due to the applicant’s failure to demonstrate that it will conduct its business honestly, fairly, equitably, carefully and efficiently within the purposes and intent of the provisions of Title 23 NYCRR Part 200 and Article 13-B of the New York Banking Law, in a manner commanding the confidence and trust of the community,” the NYDFS said.

Bittrex, which has approximately 35,000 New York consumers, was ordered to immediately cease operating in New York state and within 60 days wind down its business in New York, including transferring positions and transactions, and provide for the safe custody of assets involving New York residents, as appropriate.

In response to the NYDFS’ decision, Bittrex fully disputes the findings of the NYDFS and argued that the decision “harms rather than protects New York customers.”

“We adamantly disagree with NYDFS’ claims and allegations in regard to our anti-money laundering (AML) and compliance practices,” Bittrex said. “Corporate responsibility is in our DNA and our commitment to regulatory and compliance guidelines is second to none.”

According to Bittrex, the NYDFS’ decision contained “several factual inaccuracies” related to its internal policies, procedures and controls, and customer due diligence. Bittrex also stated that the NYDFS’ supervisory agreement restricted the coins the exchange could offer to New York residents to only ten coins, and imposed restrictions on the process by which Bittrex could offer new coins. The agency also imposed capitalization requirements that exceeded those of any other state.

“We attempted to negotiate the terms of the supervisory agreement but were told that these terms were non-negotiable,” Bittrex said. “After determining the requirements imposed by the NYDFS would have materially affected other parts of our business, including how Bittrex operates in other states and countries, we decided we could not sign the agreement. We were not provided an opportunity to see or even comment on the findings before they were made public. While we are saddened to no longer be serving the citizens of New York, we have been as transparent with NYDFS as we have been with other regulatory agencies both in the United States and around the world.”