Popular Seattle-based cryptocurrency exchange Bittrex has recently seen the New York Department of Financial Services (NYDFS) reject granting it a BitLicense, which the company requires to offer its services to the state’s residents.
The exchange, which lets users trade over 200 different cryptocurrencies, reportedly failed to satisfy requirements related to anti-money laundering, and had deficiencies in its capital. To receive a BitLicense, the NYDFS requires firms to comply with various standards that include these, as well as others related to consumer protection and cybersecurity.
— Bittrex (@BittrexExchange) March 4, 2019
The state’s regulator reportedly noted there were deficiencies in Bittrex’s compliance with the program for Bank Secrecy Act, Anti-Money Laundering, and Office of Foreign Assets Control (OFAC). The regulator’s decision, according to its letter, came after four weeks of onsite reviews at the exchange’s offices.
The BitLicense is a controversial regulatory framework that was proposed back in 2014. Initially only a handful of firms received it, although in the last few months various companies have been authorized to operate in New York.
These include stock trading app Robinhood, bitcoin ATM operators Cottonwood Vending and LibertyX, bitcoin wallet and storage service Xapo, and crypto exchange Bitstamp, which received its license roughly 24 hours before Bittrex’s application was rejected.
Other cryptocurrency-related firms, like crypto exchange Kraken, left the state after deeming the BitLicense too restrictive and/or expensive to apply for.
Bittrex Disputes NYDFS’ Findings
Shortly after seeing its application get rejected, Bittrex issued a statement disputing the regulators’ findings, and noting it has “worked diligently” with it to “address their questions and meet their requirements.”
— Bittrex (@BittrexExchange) April 10, 2019
The exchange further claims it “but vigorously challenged DFS’ attempts to apply traditional bank-centric regulatory rules to an entirely different model.“ The exchange noted it wasn’t “provided an opportunity to see or even comment on the findings before they were made public.”
Bittrex further claimed the NYDFS’ letter withholds context from the review process it went through, which it claims included being presented with an agreement that “if agreed to, would have resulted in the issuance of a BitLicense and a Money Transmission License.”
The exchange, which has over 1.6 million users throughout the world and 35,000 in New York, is now going to have to stop servicing the state’s residents within 60 days. Until now, it was operating under a “safe harbor” provision that allows BitLicense registrants to do so.