NYDFS Releases New Tool to Improve Digital Asset Monitoring

The New York State Department of Financial Services (NYDFS) said it has acquired improved technological tools for monitoring activities of virtual regulated entities. 

According to the announcement, the updated features are expected to assist the Department in identifying market manipulation, fraud, and insider trading linked with exposure to listed virtual currency wallet addresses by businesses subject to the department’s regulation.

NYDFS Superintendent, Adrienne A. Harris, believes these improvements will assist the department in combating financial crime and hold regulated entities accountable. Although the specifics of the tools were not mentioned, she claims they would help in strengthening the leadership in virtual asset monitoring.

Notably, the announcement is a follow-up to recent events regarding investigations into the issuance of stablecoins. The department said it keeps in touch with regulated organizations to learn about consumer risks and vulnerabilities related to the current volatility in the cryptocurrency market.

The NYDFS has been an influential regulator in the cryptocurrency and blockchain ecosystem. In 2015, it established BitLicense, a regulatory framework for virtual currency businesses operating in the state.

Crypto Regulation More Needed than Ever

The failure of the FTX cryptocurrency exchange serves as a reminder that more stringent regulations are required in order to safeguard users and preserve the market’s stability. Even if there are difficulties in creating effective regulations, it is obvious that some kind of control is required to guarantee the long-term success of the industry.

In a meeting at the Brookings Institution in Washington, D.C., Harris expressed her opinion that federal legislation might want to replace the state regulatory framework in her region. She suggests the New York regime because she sees it as being the most secure and stable choice.

While some exchanges have put in place robust security protocols and customer protection guidelines, many others have not, leaving their users open to hazards like fraud and hacking. Regulatory actions such as required security audits, client protection methods, and imposing of fines may be implemented to solve these challenges.

For instance, the NYDFS fined Robinhood $30 million for allegedly violating cybersecurity, anti-money laundering, and consumer protection regulations.