Thomas P. DiNapoli, Comptroller of New York State, has expressed his apprehensions regarding the administration of BitLicense by the New York State Department of Financial Services (NYDFS).
DiNapoli provided a “limited assurance” in his January report on virtual currency licensing in the state that the NYDFS carries out its supervision duties concerning BitLicense. The NYDFS is responsible for supervising other state financial authorities.
DiNapoli identified a need for more comprehensiveness of several security checks conducted on the prospective licensees. According to his team’s investigation, two out of eight sampled applicants still need to complete the fingerprinting procedure in its entirety before application approval.
In addition, the NYDFS must provide evidence of verifying applicants’ tax obligations or minimum net worth documentation.
Additionally, the Comptroller team uncovered a three-year lapse between the NYDFS-mandated biennial examinations of the licensees’ financial health and the integrity of their businesses.
In certain instances, the issuance of BitLicense followed the submission of anti-money laundering (AML) documents by the companies four years before the present, indicating that those documents have become obsolete.
“For the examination follow-up process,” DiNapoli suggests instituting formal protocols.
The document also encompasses the NYDFS’s response to the audit, which affirms that the department has recognized this “area for improvement” and implemented a template to monitor the implementation of follow-up actions regarding examination findings.
It implemented a BitLicense Examination Findings Tracking Procedure for these objectives in April 2023. Nevertheless, according to the Comptroller, only one of the eight licensees sampled received a tracking note from the NYDFS.
Established in 2015, the NYDFS has mandated that crypto firms conducting business in New York apply for a BitLicense. BitPay, Circle, Coinbase, Gemini, Paxos, and PayPal are among the 32 regulated entities comprising the list of licensees.
