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Cryptocurrency exchange bitFlyer USA has been fined $1.2 million by the New York State Department of Financial Services (NYDFS).
Regulatory Action Against BitFlyer USA
According to the financial regulator, the bitFlyer USA cryptocurrency exchange failed to meet the state’s cybersecurity requirements, despite having the necessary license to operate its services in New York.
“At the time of the Examinations, bitFlyer USA had not performed periodic assessments of its internal and external cybersecurity risks and threats. Instead, the Company relied upon an IT audit performed by bitFlyer (Japan). Although an IT audit ensures the existence of policies and procedures to protect an organization’s networks and computer systems, it does not provide visibility into the organization’s security risks or how the organization can mitigate those risks and, therefore, is not an acceptable substitute for a comprehensive risk assessment. bitFlyer USA’s incomplete approach to risk assessment is at odds with the requirements of the Cybersecurity Regulation that rely on informed decision-making pursuant to the risk assessment.”
However, the financial regulator has acknowledged the crypto exchange’s efforts to step up its cybersecurity compliance. BitFlyer has proposed a remediation plan to the regulator that will help it become compliant with the state’s cybersecurity laws by the end of the year.
Previous NYDFS Action
BitFlyer joins a long list of crypto companies and exchanges that have faced action from the New York State Department of Financial Services for several violations. Back in January, Coinbase had to pay a $50 million fine to settle charges that it allowed users to open accounts on the platform without conducting sufficient or satisfactory background checks as mandated by Know Your Customer (KYC) regulations. In 2022, Robinhood’s crypto division had to pay a $30 million fine for violations related to cybersecurity and anti-money laundering.
In February, the NYDFS launched an investigation into stablecoin issuer Paxos. While the scope of the investigation against Paxos was not disclosed, it was suspected that it was related to the financial regulator’s efforts to regulate the stablecoin ecosystem after the spectacular collapse of the Terra ecosystem. Adrienne Harris, the NYDFS Superintendent, stated that the regulator was working on drafting and establishing regulatory guidelines for asset-backed stablecoins even before the Terra collapse. Paxos has claimed on its website that cash reserves and US Treasuries back the stablecoins it issues.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.