The New York State Department of Financial Services (NYDES) has ordered the blockchain based trading platform, Bittrex to cease their operations in the state. The financial regulator has rejected its application for a Bitlicense.
NYDES cited multiple deficiencies, but for some of them, crypto exchange Bittrex immediately disputed. Meanwhile, the regulators have approved the application of Bitstamp. Now Bitstamp will be able to offer trading of five cryptocurrencies in the state. In an announcement, the New York State Department of Financial Services said that it has denied
“the applications of Bittrex Inc. to engage in virtual currency business and money transmission activity in New York.”
Bittrex is a United States based crypto exchange which headquartered in Seattle, Washington. It is the thirteenth largest cryptocurrency exchange by daily trading volume. A vast number of cryptocurrencies are listed on Bittrex. Though the crypto exchange has a good reputation because of its security measures it is not a regulated cryptocurrency exchange under the United States securities law. And now the regulator has ordered to cease their operations which can be a big trouble for Bittrex. According to a representative of NYDFS, “there is a no appeals process following a denial but the company could reapply.”
Bittrex has a user base of around 1.67 million globally in which 35,000 are in New York. The crypto exchange is penetrated in about 40 U.S. states. It is expected that the users from the U.S. will be the most affected parties. In the announcement, the regulators stated that
“Effective April 11, 2019, Bittrex must immediately cease operating in New York State and within 60 days wind down its business in New York.”
The regulators also instructed Bittrex to provide the plan to which the exchange is going to follow to wind down the business with existing customers of New York.
In August 2015, Bittrex applied for Bitlicense. After that NYDFS conducted a four-week onsite review at its head office in Washington D.C. The regulators analyzed the data and found several inadequate measures especially in the compliance program for Bank Secrecy Act, Office for Foreign Asset Control (OFAC), and Anti-Money Laundering. Regulators also said that the exchange is not doing Know Your Customer (KYC) and customer due diligence seriously. The regulators found user account name such as Donald Duck and Give me my money.
The interesting part is that Bittrex is claiming that NYDFS asked the exchange to sign an agreement in January which contained unrealistic terms and conditions such as
- Bittrex has to offer just 10 cryptocurrencies to New York residents.
- The department also told Bittrex to maintain unrealistic capital.
- And the exchange has to obtain the approval from the regulators to form or acquire any other entity.
As these demands are unrealistic so Bittrex requested NYDFS to negotiate the terms but the regulators denied. Bittrex also claimed that they did not even get a chance to see the findings of the review before they were made public.
A day before the denial of Bittrex application, the regulators have approved the application of another crypto exchange Bitstamp. Bitstamp becomes the 19th company to receive Bitlicense and now it is ready to expand its business in the state.
It seems that intentionally NYDFS has rejected the application of Bittrex to promote the business of some other crypto exchange. How such a big company which has goodwill and known for its user-friendly and secure interface can get a rejection. Is someone is trying to destroy one of the largest and trustworthy cryptocurrency exchange? The agreement which the regulators made is unrealistic which no one can sign. How the regulators can force an entity to take the approval even for acquisition, partnership, or any other business deal. The agreement could make the exchange a puppet of NYDFS.
Let us know what you think about Bittrex application rejection. Tell us about your views in the comment section.