The New York State Department of Financial Services (NYDFS) has announced enhancements to its ability to detect illegal virtual currency activity among the entities it regulates. The new capacities are part of its efforts to keep pace with the industry and proactively respond to the virtual currency market, the company said.
NYDFS released a brief statement on its new capabilities on February 21st that did not include any specifics on “new tools to monitor the risk of insider trading and market manipulation”. However, the statement promised:
“The new enhancements will provide the Department with additional capabilities to detect potential insider trading, market manipulation, and front-end activities associated with exposure to Department-regulated entities and applicants or potential exposure to listed virtual currency wallet addresses.”
NYDFS Superintendent Adrienne Harris said, “These tools will help us fight financial crime and fraud, hold regulated entities accountable, and further strengthen our national leadership in virtual currency oversight.”
Announcements of unspecified new technological capabilities appear to be part of the NYDFS enforcement handbook. Last year, the agency announced an “accelerated acquisition of additional blockchain analytics technology.” as part of its enforcement of sanctions against Russian companies after that country’s invasion of Ukraine.
#ICYMI: DFS Superintendent Adrienne A. Harris is strengthening the department’s ability to detect fraud in the virtual currency industry. pic.twitter.com/BMvJnNBCVp
— NYDFS (@NYDFS) February 21, 2023
The agency also regularly issues guidelines for the entities it regulates, advising banks on engagement with cryptocurrencies in December and claims to be the first the regulator will issue guidelines for the issuance of stablecoins in June.
NYDFS was recently instrumental in blockchain infrastructure platform Paxos Trust’s decision to stop mining Binance USD (BUSD) stablecoin after opening a coin probe. Earlier this year it won a $100 million settlement by Coinbase for allegedly maintaining a backlog of 100,000 suspicious transaction alerts. In August it reached an agreement with Robinhood Crypto fined $30 million for anti-money laundering compliance issues.
Related: Binance withdrawals and BUSD redemptions surged after Paxos hit
In addition, the NYDFS is reportedly investigating Gemini’s Earn Loan Program.
The state of New York introduced its virtual currency BitLicense, well known for its strict requirements, in 2015. The licensing regime was controversial, even New York Mayor Eric Adams criticizing it as “suffocating”.
