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NY Regulator Demands Vigilance Against Market Manipulation from Bitlicense Firms

Vigilant Against Market Manipulation

The New York State Department of Financial Services (DFS) has issued a guidance paper on Wednesday, reminding all cryptocurrency companies licensed by it that they are required to implement measures designed to effectively detect, prevent, and respond to fraud, attempted fraud, and similar wrongdoing. In addition, it reminded Bitlicense holders that they must be especially vigilant against efforts at market manipulation. The regulator has granted six Bitlicenses so far, including to Bitflyer USA, Coinbase Inc., XRP II and Circle Internet Financial, and charters to Gemini Trust Company and itBit Trust Company.

“DFS took the lead in 2015 in regulating the virtual currency market, and we continue to be vigilant concerning risks in these markets. Market manipulation presents serious risks, both to consumers and to the safety and soundness of financial services institutions,” said Superintendent Maria T. Vullo. “As the cryptocurrency markets continue to evolve, DFS is directing virtual currency companies to take the necessary steps to guard against fraud, and to be extra vigilant about manipulation. By these actions, the market can evolve with strong regulatory supervision.”

All Bitlicense Firms to Report Risks

In its guidance paper, the DFS also directed cryptocurrency firms to adopt measures that include effective implementation of a written policy to identify and assess the full range of fraud-related risk areas, including market manipulation. The policy should provides procedures and controls to protect against identified risks, allocate responsibility for monitoring those, and provide for the investigation of fraud and other wrongdoing, whether suspected or actual.

Immediately upon discovering any wrongdoing, a licensed cryptocurrency firm must submit a report to DFS with all the details. They must also submit, as soon as practicable, further reports of any developments along with a statement of the actions taken, and a statement of changes put in place in order to avoid repetition of similar events.

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