In New York, there are strict policies regarding the operation of an exchange. The only way to legally operate in the state is by applying for and being approved for a BitLicense. Considering this rule, the Bittrex exchange decided to apply for their own BitLicense, which was denied on Wednesday.
The New York Department of Financial Services (NYDFS) published a letter to discuss why the rejection happened, which is the first time that one has been imposed in two years.
The application process, as deputy superintendent and deputy counsel of NYDFS Daniel Sangeap wrote, had involved work on both sides to handle the “deficiencies,” which were supposed to help with creating “appropriate controls and compliance programs.”
Ultimately, the regulation continued to send deficiency letters to the exchange, ever since the original application was submitted. Issues were brought up regarding anti-money laundering procedures, compliance with the Office of Foreign Assets Control, and the coin listing process. Despite these notifications to the platform, the concerns were not handled, according to Sangeap.
The letter details much more about the lack of compliance, saying that the policies and procedures that they are meant to have either are “non-existent or inadequate.” In fact, the lack of handling of these problems has led the NYDFS to believe that there is a serious issue with the “level of authority and effectiveness of the Compliance Officer.”
They suggested that the training program for the exchange may not be prepared enough to handle the necessary issues of daily use.
The OFAC screening process was addressed by the letter from Sangeap as well, saying that it might have an issue with determining when names are misspelled, since the process is not automated.
The “active customer file” indicates that there were multiple transactions performed involving “customers from OFAC sanctioned countries,” which created a new cause for concern as well.
Coin diligence was named in the letter as well, saying that there was no way for the NYDFS to “assess compliance” with the token review policy that the company implemented themselves, based on a sampling of 15 crypto assets. Sangeap explained that there were only “partial files provided to the examiners,” and that the actual compliance “could not be established.”
Bittrex responded to the rejection by posting to Twitter. The exchange expressed that they were both “saddened and disappointed” in the denial, saying that the actions hurt more than help the customers in New York.
The platform also expressed that they plan to appeal, considering the work that they have done with the NYDFS to handle the questions that they have had over the last 3.5 years. However, a spokesperson for NYDFS recently told CoinDesk that there is no appeals process, and the only thing that Bittrex can do is reapply.
— Bittrex (@BittrexExchange) April 10, 2019
Bittrex provided another statement today, that originally said that a supervisory agreement was proposed, dropping the 200 cryptocurrencies offered down to 10. Since these changes appeared to be unacceptable to Bittrex, the company refused to sign, and now has to cease their business in New York within the next 14 days.
During the next two weeks, Bittrex will have to establish their own plan to stop business activities with the residents of New York. They will have a total of 60 days, however, to transfer any custodied assets for the residents.
Many commenters appeared to be unhappy with the decision. Some comments were simply saying that New York made the wrong decision, like Jadid Herrera, who said that the entity has “issues.”
— Jadid Herrera 🕵🏻 (@jadid) April 10, 2019
However, there were still consumers that believe the right choice was made.
Good riddance they deserve it after they did scammy ieo with bots.
— ✌️NUFC ✌️ (@jahankhan786) April 10, 2019