Crypto Exchange Penalized By New York Regulator For Violating Laws

Crypto exchange bitFlyer USA was penalized by the New York State Department of Financial Services (NYDFS) for violating cybersecurity regulations. The NYDFS imposed a civil monetary penalty of $1.2 million on the crypto exchange for failing to maintain a compliant cybersecurity program.

BitFlyer USA, a subsidiary of bitFlyer Holdings, is licensed to operate in New York since 2017. The NYDFS acknowledges the efforts of the crypto exchange to improve its cybersecurity program by the year’s end.

BitFlyer USA Fined by NYDFS

According to a consent order on May 2, the New York State Department of Financial Services has fined bitFlyer USA $1.2 million for violating cybersecurity regulations. BitFlyer USA provides cryptocurrency trading and custodial wallet services in the U.S.

The NYDFS conducted investigations of bitFlyer USA since providing a license under the Virtual Currency Regulation and Cybersecurity Regulation in 2017. The NYDFS found multiple shortfalls in the exchange’s cybersecurity program.

The New York regulator said bitFlyer USA failed to fully comply with the Cybersecurity Regulation. Also, it failed to establish and maintain an effective cybersecurity program through written policies as per the Virtual
Currency Regulation. The exchange has relied on bitFlyer Japan for audits, developments, customer support, and other tasks.

“bitFlyer USA had not performed a comprehensive risk assessment as required by 23 NYCRR § 500.09(a), bitFlyer USA’s cybersecurity program was not designed to protect its electronic systems from unauthorized use in violation of 23 NYCRR § 200.16(a).”

The regulator has asked the crypto exchange to improve its cybersecurity programs until December 31, 2023. However, the NYDFS acknowledges bitFlyer USA’s ongoing efforts to remediate the deficiencies specified in the consent order.

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NYDFS Strict Crypto Regulatory Stance

The NYDFS has maintained a strict regulatory stance against the crypto market recently, bringing fines and enforcement against crypto companies.

In fact, the New York regulator’s action against Paxos caused major challenges for Binance after it ordered to stop minting BUSD in February. Coinbase, BitPay, and Robinhood among others were fined by the NYDFS maintaining its strict stance.

It also introduced the Adoption of Virtual Currency Assessment Regulation to collect supervisory fees from licensed cryptocurrency firms operating within the New York state.

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