The article was updated on 20 December, 2019 by Amicus.
11 April, 2019, | AtoZ Markets - New York rejects Bittrex Bitlicense application due to exchange’s inadequate policies and controls on anti-money laundering standards (AML), Know Your Customer (KYC) and the Office of Foreign Asset Control (OFAC). It is according to the official note from the New York financial authority sent to Bittrex CEO Bill Shihare. Moreover, Bittrex is 54th in rank on CoinMarketCap’s list of digital currency exchanges in terms of adjusted trading volume.
Bittrex Case in a Brief
The BitLicense is a set of regulations put forward by the New York State Department of Financial Services. That is necessary for running a crypto business in the state, serving New York (NY) residents.
Bittrex applied for BitLicense in August 2015. The exchange operated on the terms of a “safe harbor” permitted by NYDFS while the regulator was considering its application. According to NYDFS:
"It has issued many compliance letters for Bittrex to eliminate remaining flaws. And it helps Bittrex to develop appropriate control and compliance programs commensurate with the evolving nature of the sector.”
Bittrex Responses to New York Decision
Bittrex, in its turn, expressed disappointment at the NYDFS decision and said that the regulation "harms rather than protects customers in New York." The exchange also explained its disagreement with the NYDFS claims regarding AML and its compliance practices.
Commenting on the NYDFS decision, the crypto trading platform stated that
"It supports the risk assessment framework approved by a third-party consultant and fully trains all company employees in their policies and procedures for AML. It also checks for the presence of SDN (specially designated citizens) and tracks all OFN's SDN updates, checking clients after notification."
New York Standards
Bittrex added that NYDFS sets capitalization requirements that exceed the requirements of any other state. These claims were allegedly based on a pre-existing storage formula using “hot wallet” and “cold wallet storage.” However, it was disregarding the assortment of coins listed by Bittrex and ignoring the risks of frequent moving assets from hot to cold storage.
In a press release, Bittrex stated that the NYDFS letter contained several factual inaccuracies regarding, among other things. Those were also the implementation of transaction monitoring, risk assessment systems and customer verification.
Is New York Crypto Policy too Strict?
NYDFS decided that Bittrex should cease all business operations in New York State by tomorrow, April 11th. Bittrex must also send a letter to the NY finance authority within 14 days, confirming that they have closed their state operations.
Legislators who advocate digital assets noted the need for policies that promote innovation in the crypto sector. It was in a press release, after the re-enactment of the Tax Law on Tokens in the US Congress. They also called the policy on digital currencies in certain states, including New York as “burdensome” and “hard”.
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