April 23rd, 2019
Its been a couple of weeks since Bittrex was denied license by the NY Regulators for a variety of reasons. One of the grave claims that came against the exchange was that Customer due diligence and the regulators flagged two accounts that it identified as users from North Korea. But after studying and researching the origins of these accounts, Bittrex has released an official statement stating that he mentioned accounts were actually from South Korea and NYDFS had mistakenly flagged their origins to North Korea.
Were these two accounts the only reason for denial of Bitlicense to Bittrex?
It was the second week of April 2019, while everything was going smooth for cryptos after a long time, Seattle-based crypto exchange Bittrex hit a roadblock. The New York Department of Financial Services, the regulator that is in charge of providing Bitlicense, rejected Bittrex application, an action that it had not taken in over two years.
While there were a variety of reasons put forward by the regulator issued to Bittrex on the grave claim that came forwards was Bittrex had poor customer due-diligence practices and also had incomplete or missing customer identity data.
Although Bittrex did claim to media outlets that “the fake accounts cited by the regulator were not active ones.” It came out to be that, more than 70 percent of the “fake name” accounts sampled by DFS had been active accounts at some point, and some still contained funds at the time of DFS’s on-site review in 2019 of Bittrex’s operations.
Over and above this, when DFS examiners sampled accounts in 2019, their small sample identified two North Korean accounts. More may exist. At least one North Korean account was active into 2017. At least two Iranian accounts were still active in the Bittrex system when DFS examiners visited Bittrex in 2019, and potentially usable. Both Iran and North Korea have not been great friends of the United States and for an American exchange to hold accounts from these countries was not appreciated.
After studying these claims for nearly a fortnight, Bittrex has begun replying to the questions that were raised by the NY regulator. Its first answer it is with respect to the two flagged North Korean accounts. According to the exchange, the flagged accounts were actually from South Korea and not North Korea.
— Bittrex (@BittrexExchange) April 22, 2019
Bittrex also objected to DFS’s standard supervisory agreement, which contained provisions that have been applied to all prior applicants, and which are either required by the Virtual Currency Regulation or are an implementation of its provisions. These supervisory agreement provisions require pre-approval of new products, pre-approval of mergers and acquisition transactions, and set forth a capitalization formula that implements the regulation’s capitalization requirement.
As Bittrex has started answering back to NYDFS, one can expect more replies in days to come. Every reply is bringing Bittrex closer to the Bitlicense.