NYDFS introduces enhancements for crackdown on virtual currency fraud

• The NYDFS has enhanced its ability to detect fraudulent activities in the virtual currency market and combat financial crime
• Superintendent Adrienne Harris stated that the enhancements will hold regulated entities accountable for their actions.

The New York Department of Financial Services (NYDFS) has introduced enhancements to its ability to detect illegal activities in crypto firms. This is the latest development in the New York regulator’s increased scrutiny of firms operating in the virtual currency space. 

Increased ability to detect insider trading and more

The NYDFS announced the enhancements in a 21 February press release. According to the Superintendent of the NYDFS, the new measures have enhanced the firm’s ability to detect illegal activity, including fraud, market manipulation and insider trading. 

The press release read:

“The new enhancements will provide the Department with additional capabilities to detect potential insider trading, market manipulation, and front-running activity associated with Department-regulated entities’ and applicants’ exposure or potential exposure to listed virtual currency wallet addresses.”

NYDFS Superintendent Adrienne A. Harris plans to use all of its regulatory tools to keep the virtual currency firms in New York in check. This was in addition to framing data driven policies and responding to the demands of the virtual currency market.

Additionally, the Superintendent said:

“This is a significant step in our supervision of the virtual currency industry as it continues to quickly transform and mature. These tools will help us combat financial crime and fraud, hold regulated entities accountable, and further strengthen our national leadership in virtual currency supervision.” 

The New York regulator further revealed that it has been in close contact with the crypto entities that fall under its regulatory jurisdiction. These enhancements are the latest in a series of steps taken by the NYDFS after the market’s turmoil.

The regulator had issued guidelines for crypto entities last month. Notably, this would reiterate expectations for sound custody and disclosure practices in the event of insolvency.