The Superintendent of the New York Department of Financial Services (NYDFS), Adrienne Harris, decried the anonymity element in cryptocurrency as attracting bad actors. Addressing the Crypto Winter Summit organized by the Financial Times on Tuesday December 5, the superintendent iterated that the digital asset ecosystem is lending itself into a conduit to move illicit finance.
Criminal Actors’ Preference for Digital Currency
Speaking on a panel during the London event, Harris illustrated that crypto is facilitative to bad actors. In particular, the New York regulator warned that digital currency is easy to reach in executing ransom payments.
Harris indicated that the settling ransoms in cash necessitated an appearance at the drop site. Digital currency eliminates physical involvement despite the existence of traceability elements.
Harris indicated that the involvement of cryptocurrency in illicit finance tops the agenda of state and federal regulators. The objective lies in cutting the links to the bad actors.
The scrutiny of crypto-related transactions is a necessity for state and federal regulators particularly the awareness of Binance case settlement. Also, the cases pending in court where the Depart of Justice (DoJ) has leveled charges necessitate heightening action against crypto-assisted illicit financing.
Challenges of Socializing Digital Currency Firms
Harris decried that NYDFS faces the challenge of socializing digital firms to the regulatory context. She lamented that the New York regulator has targeted socializing companies, particularly within the financial services sector.
As such, insurance, mortgage lenders, and banks are pertinent to the NYDFS socializing process. The participants ultimately become knowledgeable of the nature of the interaction.
Its replication in the cryptocurrency ecosystem mandates a tone rest. Harris observed that such requires NYDFS to lay out the rules and expectations to the digital currency firms.
The scope involves imposing enforcement where necessary. Harris illustrated that NYDFS had undertaken such a mandate in the case of a $100 million fine imposed on Coinbase and $30 million against Robinhood.
Crypto Business Scale Outpaces Compliance
Harris lamented that the crypto business scale is outpacing the compliance apparatus. She illustrated such as prevalent given the major cases where crypto firms are battling a series of charges from noncompliance with the regulations.
Harris pointed out that noncompliance has become common in the policies targeting to eradicate illicit finance and cybersecurity activities. She urged crypto firms to prioritize resourcing relevant compliance.
Harris criticized the continued delay in materializing the robust know-your-customer (KYC) checks despite repeated assertions that blockchain technology lends itself to scrutiny.
The superintendent indicated that their investigations of crypto firms always led to the discovery of paper rimes within the offices. The bulk of paperwork is immense, urging crypto firms to embrace digital audit trails in their ecosystem as they pursue maturity in financial services.
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