The New York State Department of Financial Services (NYDFS) has declared that it has improved its ability to identify unlawful activities involving digital currency among the organisations it oversees.
These enhancements are intended to enable the agency to stay up-to-date with the industry and take preventive measures in response to developments in the virtual currency market.
The NYDFS issued a brief statement on February 21 announcing its new capabilities for monitoring insider trading and market manipulation risks but did not provide any details about the tools themselves.
The statement stated that the enhancements would enable the department to identify potential instances of insider trading, market manipulation, and front-running related to virtual currency wallet addresses listed by entities and applicants under the department's regulation.
According to Adrienne Harris, the superintendent of NYDFS, the newly developed tools will aid in the fight against financial crime and fraud, ensure that regulated entities are held responsible, and enhance the department's position as a leader in supervising virtual currencies at the national level.
The NYDFS appears to have a strategy of announcing the development of new technological capabilities without providing specific details. Last year, the agency declared that it would rapidly acquire additional blockchain analytics technology to enforce sanctions against Russian companies following their invasion of Ukraine.
The department frequently provides guidance to the organisations it oversees, including advising banks on how to interact with crypto in December and asserting that it was the first regulatory body to issue guidelines for the issuance of stablecoins in June.
The NYDFS played a key role in the decision by Paxos Trust, a blockchain infrastructure platform, to cease issuing the Binance USD stablecoin after launching an investigation into the coin.
Earlier this year, the NYDFS secured a $100 million settlement from Coinbase for supposedly neglecting to act on 100,000 suspicious transaction alerts. It also reached an agreement with Robinhood Crypto in August, resulting in a $30 million penalty for Anti-Money Laundering compliance issues. Furthermore, there are reports that the NYDFS is examining Gemini's Earn lending program.
In 2015, New York state implemented BitLicense, a regulatory framework for digital currencies that is well-known for its rigorous requirements. The licensing system has been a source of contention, with even the mayor of New York City, Eric Adams, criticising it as overly restrictive.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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