New York Financial Regulator Rejects Bittrex BitLicense Application | ForkLog

New York Financial Regulator Rejects Bittrex BitLicense Application

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10.04.2019

The New York Department of Financial Services (NYDFS) said on Wednesday it has rejected Seattle-based Bitcoin exchange Bittrex’s application for a BitLicense.

In a statement, the NYDFS said it denied Bittrex’s application due to deficiencies in the exchange’s capital, as well as anti-money laundering, requirements. The regulator also cited Bittrex’s “failure to demonstrate that it will conduct its business honestly, fairly, equitably, carefully, and efficiently,” ordering the exchange to cease operating in the state of New York and wind down its business within 60 days.

In a separate letter to Bill Shihara, CEO of Bittrex, who along with a group of security professionals founded Bittrex in 2013, NYDFS said it had issued several deficiency letters to the exchange, covering such issues as anti-money laundering, due diligence, and capital requirements.

It noted Bittrex’s inadequate customer due diligence, with a large number of transactions missing required tax identification numbers or customer names.

“Throughout Bittrex’s application process, the Department worked steadily with Bittrex to address continued deficiencies and to assist Bittrex in developing appropriate controls and compliance programs commensurate with the evolving nature of the sector,” wrote Daniel Sangeap, deputy superintendent and deputy counsel at NYDFS.

NYDFS examiners also found a substantial number of aliases such as “Give me my money”, “Elvis Presley”, “Donald Duck”, as well as what the regulator described as “obscene terms and phrases” that are used in identifying accounts at Bittrex.

Overall, the regulator found Bittrex’s compliance program deficient given that it has a customer base of about 1.67 million users across multiple countries, including 35,000 New York-based users, offers 212 cryptocurrencies and processed more than 100 million transactions annually in 2017 and 2018.

The New York regulator also ordered Bittrex to cease operating in the state of New York and wind down its business within 60 days.

In a statement, Bittrex disputed the regulator’s findings and said it has already begun addressing many of these concerns.

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

The exchange offers more than 200 cryptocurrencies to its customers, including through an OTC trading desk launched earlier this year. In its statement, Bittrex said NYDFS presented a supervisory agreement to the exchange which would have allowed it to offer only 10 cryptocurrencies.

“This would have prohibited Bittrex from listing coins that are offered to New York residents by other BitLicensees,” the statement said. “NYDFS reserved the right to order us to withdraw coins at any time. Additionally, DFS would be able to prohibit offering tokens to NY residents, even if other NY BitLicense holders were able to offer the tokens.”

These terms were unacceptable to Bittrex, the company said, and it refused to sign the agreement.

Bittrex has 14 days to confirm to NYDFS that the exchange has ceased conducting business in New York and create a plan to wind down any existing business with state residents. The exchange will have 60 days in total to transfer any assets it custodies for New York residents and transfer any positions or transactions. There is no appeals process for the rejection, though Bittrex can reapply for a BitLicense.

On Tuesday, April 9, NYDFS granted a BitLicense to Bitstamp, Europe’s oldest and biggest Bitcoin exchange.

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