New York’s financial watchdog has warned crypto companies that their BitLicense applications could be thrown out without warning if its feedback is not heeded.
In an recent update, New York’s Department of Financial Services (DFS) said a new three-strikes rule would authorize it to deny any applications that didn’t address or consider any deficiencies highlighted by the regulator.
The warning reads, “[I]f all deficiencies involving a particular application requirement or set of requirements have not been fully and effectively addressed by the end of the response period for the third deficiency letter … the DFS may, without further notice, deny the application.”
The new rule coincides with the fifth anniversary of the BitLicense, which saw the regulator update its framework for businesses, like exchanges and wallets providers, to operate legally in New York State. To date, only 25 companies have been approved, with 19 receiving actual licenses and six receiving limited purpose trust charters.
The most recent successful applicant was derivatives clearinghouse ErisX, which received its BitLicense at the start of May.
Indeed, part of the motivation behind this week’s rule change is to help streamline the application procedure. The regulator argues that the three-strike rule will encourage applicants to make sure they have fully addressed all the concerns laid out in the deficiency letters before resubmitting.
“DFS believes this policy will benefit the majority of applicants that diligently advance their applications once they are under substantive review, by allowing for a more effective use of DFS resources,” the note reads.
Another aspect of this week’s rule change is a new checklist feature that companies can use to ensure they have completed all steps required, such as providing all the right documentation before they send off their application to the regulator.
But rather than getting easier, as some publications have suggested, theDFS has told applicants they need to step up their game even further.