29.03.2024

New York Governor Proposes Giving Financial Watchdog More Teeth

While NYDFS, the creator of the notoriously hard to acquire «BitLicense,» can already bring enforcement actions against unlicensed entities, some companies can claim that they are not subject to the regulator because they do not directly sell their products to consumers.

New York governor Andrew Cuomo wants to give the Department of Financial Services (NYDFS) more powers in regulating certain licensed entities, including cryptocurrency startups.

Cuomo presented his 2020 «state of the state» plan on Wednesday, publishing a 321-page list of proposals including a new look at exemptions that currently exist for certain consumer financial products and services.

Further, insurance and banking laws grant NYDFS the authority to collect costs for assessments, but companies operating under the Financial Services Law are not explicitly required to pay up.

«Entities licensed under the FSL (e.g. virtual currency entities) are not required to pay such assessments, despite being subject to similar examination and oversight requirements,» the document reads.

Cuomo wants to amend the law to close these loopholes, according to the document.

NYDFS has regulated cryptocurrency startups under its virtual currency license since mid 2014. Superintendent Linda Lacewell announced last October that the agency was reviewing the regime, citing the crypto industry’s evolution since the BitLicense was first proposed.

Proposed changes include a modification to the approval process for listing cryptocurrencies and a model framework for coin listings that exchanges can use. NYDFS is accepting public comment through Jan. 27.

New York Court Rules That State Attorney Has Jurisdiction Over Bitfinex

The New York State Supreme Court has ruled that the New York Office of the Attorney General (NYAG) has jurisdiction over cryptocurrency exchange Bitfinex.

According to a court filing on Aug. 19, this will allow the NYAG to continue its investigation of the exchange over allegations of fraud and misleading investors.

In the filing, Judge Joel Coehn dismissed a motion by Bitfinex to terminate an action by the NYAG that would prosecute Bitinex under a New York law – the Martin Act. The NYAG originally alleged that Bitfinex and associated stablecoin firm Tether covered up an $850 million loss and in doing so, misled investors in the state of New York.

The allegations have resulted in a protracted legal battle between Bitfinex and state prosecutors, with the exchange claiming that it spent $500,000 and hired over 60 lawyers in order to comply with documentation requests by the NYAG.

The issue of jurisdiction has recently become a primary issue of contention in the case. Legal representatives for both Bitfinex and Tether have previously submitted documents to the court, stating that neither firm served customers in New York – which has a uniquely stringent regulatory regime for cryptocurrencies.

The lawyers claimed that, even should the state be able to prove that they had served New York clients, it could not establish whether those customers were harmed by the exchange or stablecoin issuer’s alleged actions.

Today’s ruling by Justice Cohen denies Bitfinex and Tether’s motion to terminate the NYAG’s action on the grounds that it was extra-jurisdictional in addition to dissolving a temporary stay of the state’s investigation.

Bitfinex’s claims that it did not serve New York-based customers is further complicated by reports that United States-based users are still able to access the platform by simply lying on a pop-up query about their geographical location.

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