New York Regulators: Bittrex Out, Bitstamp In

Bittrex Ordered to Halt Operations By New York

New York Orders Bittrex to Cease Operations but Approves Bitstamp

New York State’s monetary regulator has ordered Bittrex to stop operating in the state after declining its application for a Bitlicense. Multiple deficiencies were pointed out, some of which Bittrex challenged immediately. On the other hand, Bitstamp has been green-lighted to offer the trading of 5 cryptocurrencies in the state.

One Approval, One Rejection

The New York State Department of Financial Services (NYDFS) authorized one crypto exchange for a Bitlicense and then turned down another the following day. The regulator announced Wednesday that it has denied “the applications of Bittrex Inc. to engage in virtual currency business and money transmission activity in New York.”

An agent at the NYDFS told Wednesday:

There is no appeals process following a denial but the company could reapply.

Bittrex to Cease Operations in New York

Bittrex has approximately 1.67 million users worldwide including those in about 40 U.S. states, roughly 35,000 of which are in New York, the regulator noted. “Effective April 11, 2019, Bittrex should immediately stop running in New York State and within 60 days unwind its business in New York,” the announcement stated. Bittrex must also supply a plan for how it will wind down business with existing New York clients, due within 14 days. There will be charges for non-compliance.

NYDFS vs Bittrex

Bittrex applied for a Bitlicense on Aug. 10, 2015. In its decision letter, the NYDFS revealed that it conducted a four-week onsite review at Bittrex’s Seattle and Washington D.C. offices and sample transactions between Jan. 1, 2017 and Dec. 31 last year were analyzed.

The department claims to have discovered a variety of inadequate procedures, especially in the exchange’s compliance program for the Bank Secrecy Act, Anti-Money Laundering, and Office of Foreign Assets Control (OFAC). Bittrex immediately provided a statement that  “fully disputes” the NYDFS’ findings, citing “several factual inaccuracies.”

New York versus Bittrex

The regulator stated that the exchange’s KYC (Know Your Customer) and customer due diligence “are seriously deficient,” with “a substantial number of aliases” found as user account names such as “Give me my money,” “Elvis Presley,” and “Donald Duck.”

It also alleges that “a large number of transactions for customers living in sanctioned countries (including Iran and North Korea) had passed through screening and were processed.” Disputing the allegations, Bittrex declared:

The Iranian customers referenced in the letter were reported to OFAC in January 2018; we do not have and have never had any North Korean customers.

Unrealistic Demands

Bittrex claims most notably, that in January the NYDFS asked it to sign “a supervisory agreement that, if agreed to, would have resulted in the issuance of a Bitlicense and a Money Transmission License,” referencing three key conditions it could not agree to.

New York Orders Bittrex to Cease Operations but Approves Bitstamp

The first is that Bittrex would need to accept to restrict its offering to New York residents to just 10 cryptocurrencies, with restrictions on the process of providing new coins. Secondly, the department has actually enforced “unrealistic capital requirements” that are “far in excess of that of any other state,” Bittrex believes. Last but not least, the exchange would need to obtain the regulator’s approval to form or acquire any other entity.

Bittrex decided it might not sign this arrangement and “attempted to negotiate the terms of the supervisory agreement but were told that these terms were non-negotiable,” the exchange revealed. “We were not provided an opportunity to see or even comment on the findings before they were made public.”

Instead, Bitstamp Gained Approval

Another crypto exchange, Bitstamp, is planning an expansion into the state as the very same regulator approved its application the previous day, all while Bittrex has to depart the state of New York.

A U.S. subsidiary of Bitstamp Ltd., Bitstamp USA Inc., became the 19th company to receive a Bitlicense on April 9. According to the company’s announcement:

Bitstamp’s Bitlicense allows it to offer trading in five cryptocurrencies – BTC, ETH, XRP, LTC and BCH – in addition to others it may add in the future.

What do you think of the NYDFS approving Bitstamp’s application but rejecting Bittrex’s? Let us know in the comments section below.

Images courtesy of Shutterstock.


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