Bittrex’s BitLicense was Rejected, NYDFS Responds Regarding Exchange Licensing Requirements

The New York Department of Financial Services (DFS) announced that it is denying Bittrex’s application for a license. The denial, which appeared in an April 10, 2018 press release by DFS, states that the decision was based on the

“failure to meet the licensing requirements of DFS, primarily due to definitizes 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.”

Coindesk has received a statement from Bittrex, in which Bittrex comments on DFS’s actions. Bittrex argues that DFS failed to provide the company with guidance and that its application was pending for a significant amount of time.

Regardless of what is true or untrue, according to an article by American Banker, “[John] Roth [the company’s chief compliance and ethics officer] said that the company has a suspicious transaction monitoring process that’s partially automated and partially manual. It had been taking steps to fully automate it.” Further, DFS informed Bittrex of the need to create a better transaction monitoring system and Bittrex seemingly promised to follow through.

And for some time, it did. In 2018, the company hired compliance staff and eventually issued a manual transaction monitoring system. The issue is that the system was only able to handle a few transactions and could not perform a comprehensive risk assessment.

Another potential issue is that Bittrex does not have complete customer identity data. Without this information, it would be difficult for the platform’s compliance team to ensure compliance. Bittrex pointed out, though, that the regulators cited to fake accounts and that such accounts were not active.

Finally, Bittrex also has a number of coins on its exchange, some of which it claims are decentralized. Whether or not the coins are decentralized, the platform is the final decision maker in terms of what coins are listed. Therefore, it has the obligation to ensure that the coins that are listed are done so after due diligence is conducted.

According to Coindesk, Bittrex responded to the op-ed and the response can be viewed here.