NYDFS Enhances Virtual Currency Fraud Detection Capabilities

New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris recently announced that the Department has “enhanced its ability to detect fraud and other illegal activity among New York State-regulated entities engaged in virtual currency activity through new insider trading and market manipulation risk monitoring tools.”

Superintendent Harris 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 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.”

DFS has been in close contact “with New York State-regulated virtual currency entities in light of recent events in the virtual currency market space.”

This recent announcement “builds upon recently issued Guidance regarding the use of blockchain analytics; first-in-the-nation criteria for USD-backed stablecoins; new Guidance to better protect customers in the event of a virtual currency insolvency or similar proceeding; and previously issued Guidance related to preventing market manipulation and other wrongful activity.”

DFS continues to “use all of its regulatory tools to keep pace with the industry, make data-driven policy decisions, and respond proactively to the virtual currency market.”

The New York State Department of Financial Services (DFS or NYSDFS) is the department of the New York state government “responsible for regulating financial services and products, including those subject to the New York insurance, banking and financial services laws.”

The mission of the department, “according to its website, is to: foster the growth of the financial industry in New York and spur state economic development through judicious regulation and vigilant supervision; ensure the continued solvency, safety, soundness and prudent conduct of the providers of financial products and services; ensure fair, timely and equitable fulfillment of the financial obligations of such providers; protect users of financial products and services from financially impaired or insolvent providers of such services; encourage high standards of honesty, transparency, fair business practices and public responsibility; eliminate financial fraud, other criminal abuse and unethical conduct in the industry; and educate and protect users of financial products and services and ensure that users are provided with timely and understandable information to make responsible decisions about financial products and services.”

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