Bittrex provides statement on NYDFS decision to deny BitLicense

Earlier today, the New York Department of Financial Services (NYDFS) released a statement regarding the denial for the applications of crypto exchange company Bittrex to engage in business and money transmission activity in New York due to failure to meet the licensing requirements of DFS.

The statement said it was primarily due to deficiencies in Bittrex’s BSA/AML/OFAC compliance program; deficiency in meeting the Department’s capital requirement; and deficient due diligence and control over Bittrex’s token and product launches.

Now, effective April 11, 2019, Bittrex must immediately cease operating in New York State and within 60 days wind down its business in New York, including transferring positions and transactions, and provide for the safe custody of assets involving New York residents, as appropriate. Bittrex’s customer base of approximately 1.67 million users is spread across multiple countries and approximately 40 states, and includes approximately 35,000 New York consumers.

To this decision, Bittrex communicated the following:

“Bittrex is saddened and disappointed in today’s decision by the New York Department of Financial Services (NYDFS), which we believe harms rather than protects New York customers. Bittrex fully disputes the findings of the NYDFS in today’s decision. We have worked diligently with NYDFS to address their questions and meet their requirements since first applying for our BitLicense in August of 2015. First, and foremost, we adamantly disagree with NYDFS’ claims and allegations in regard to our anti-money laundering (AML) and compliance practices. Corporate responsibility is in our DNA and our commitment to regulatory and compliance guidelines is second to none.”

More specifically, today’s letter contains several factual inaccuracies that Bittrex felt must be addressed: 

Internal Policies, Procedures, and Controls

Customer Due Diligence

Additionally, Bittrex felt that today’s NYDFS letter withholds key context from the review process. In January of this year, NYDFS presented to Bittrex a supervisory agreement that, if agreed to, would have resulted in the issuance of a BitLicense and a Money Transmission License.

There were significant issues with the agreement:

[perfectpullquote align=”full” bordertop=”false” cite=”The Bittrex Team” link=”” color=”” class=”” size=”17″]”We attempted to negotiate the terms of the supervisory agreement but were told that these terms were non-negotiable. After determining the requirements imposed by the NYDFS would have materially affected other parts of our business, including how Bittrex operates in other states and countries, we decided we could not sign the agreement. During the application process, which included extensive engagement with DFS, including onsite visits for a period of four weeks, Bittrex was responsive to all of DFS’ requests for information. However, Bittrex respectfully but vigorously challenged DFS’ attempts to apply traditional bank-centric regulatory rules to an entirely different model. We were not provided an opportunity to see or even comment on the findings before they were made public. While we are saddened to no longer be serving the citizens of New York, we have been as transparent with NYDFS as we have been with other regulatory agencies both in the United States and around the world. We do not challenge that Bittrex is on a journey to improving and maturing our compliance function. Less than 2 years ago, we were a company of only four people.  Bittrex is a young, innovative company that believes in the future of blockchain technology. Bittrex will continue to mature its compliance program because we believe in being good corporate citizens, and because we believe in the rule of law. We will continue to work with the many other regulators, and we will continue to take constructive feedback to improve our ability to be the corporate citizens we have set out and committed to be.”[/perfectpullquote]