The New York State Department of Financial Services (NYDFS) has imposed a hefty fine of $1.2 million on cryptocurrency exchange BitFlyer USA for failing to comply with the state’s cybersecurity regulations. While the penalty is significant, the NYDFS acknowledges BitFlyer’s efforts to upgrade its cybersecurity by the end of 2023.
As a leading watchdog in the state, the NYDFS holds the power to conduct investigations and impose fines when necessary. Local requirements mandate that BitFlyer and other crypto exchanges licensed by the regulator must establish a comprehensive cybersecurity program designed to protect their systems and clients from both internal and external cyber risks.
BitFlyer USA fell short of these standards, with the NYDFS discovering “multiple deficiencies” in its cybersecurity program. According to the regulator, the exchange failed to comply with the Department’s Cybersecurity Regulation and neglected to establish and maintain an effective cybersecurity program through the implementation of written policies, as required by the Virtual Currency Regulation.
BitFlyer has ten days from the consent order’s effective date to pay the fine. However, the NYDFS has also recognized the company’s ambition to address these regulatory issues. BitFlyer presented a remediation plan that, if successfully implemented, could bring the exchange into compliance by the end of the year.
Other cryptocurrency exchanges, such as Gemini, have also faced regulatory challenges from the NYDFS, which launched an investigation against the Winklevoss-led firm in January for allegedly misleading its 340,000 Earn users about FDIC protection.
In a recent development, the NYDFS announced that it would start billing registered crypto entities for annual supervision and examination costs, aligning cryptocurrency organizations more closely with banks and insurance companies. Superintendent Adrienne Harris believes that collaborating with the regulator will benefit crypto businesses, stating that it allows both parties to “better oversee the markets and protect consumers.”
These ongoing regulatory challenges highlight the need for cryptocurrency exchanges to prioritize compliance when expanding their operations. In doing so, they can better safeguard their clients’ investments, help maintain a stable market, and foster a healthier industry ecosystem. As the landscape continues to evolve, both regulators and exchanges must work hand-in-hand to ensure that the upsides of this rapidly growing space can be harnessed, while adequately addressing potential risks.
Source: CryptoPotato
