New York financial regulator to strengthen oversight of the crypto market

The New York State Department of Financial Services (NYDFS) announced an update to tools for monitoring illicit activity involving digital assets among supervised entities.

#ICYMI: DFS Superintendent Adrienne A. Harris Strengthens Department’s Ability to Detect Fraud in the Virtual Currency Industry. pic.twitter.com/BMvJnNBCVp

— NYDFS (@NYDFS) February 21, 2023

“These tools will help us fight financial crime and fraud, hold regulated entities to account, and further strengthen our national leadership in virtual currency oversight,” NYDFS said.

The regulator did not disclose details. In a statement, it said that the updates would provide the Department with new capabilities to detect potential insider trading and cases of market manipulation.

On February 10, NYDFS initiated an investigation into the issuer of Binance USD (BUSD), Paxos. The regulator later ordered the firm to stop issuing the stablecoin.

The company said it would halt the issuance of the asset, but would continue to support redemptions and conversions at least until February 2024. In the Department explained that their actions were due to insufficient reserve backing for the ‘stablecoin’.

There were also reports of threats by the SEC to sue Paxos for securities-law violations in the issuance of BUSD.

In 2022, Circle filed a complaint with NYDFS regarding the quality of reserve management for Binance USD, according to Bloomberg.