BitFlyer USA has been ordered by the New York State Department of Financial Services (NYDFS) to pay a fine of $1.2 million for failing to comply with the state’s cybersecurity regulations. While the watchdog endorsed the company’s efforts to upgrade its cybersecurity program by the end of 2023, it has discovered multiple deficiencies in BitFlyer USA’s cybersecurity program. As per local requirements, all crypto exchanges licensed by the regulator, including BitFlyer, should set up a cybersecurity program to protect electronic systems, notify potential internal and external cyber risks and grant maximum protection to clients.
NYDFS Penalties and Latest Requirements for Crypto Exchanges
The NYDFS reminded that it has the authority to conduct investigations and impose fines if necessary as the main watchdog of the state. Another crypto exchange that had regulatory issues with the NYDFS this year is Gemini. The regulator launched an investigation against the Winklevoss-led firm in January. Recently, the agency said that it will begin to bill crypto entities registered in New York for annual supervision and examination. The new rule will apply to companies that have secured the Bitlicense. Crypto businesses could benefit from the collaboration with the regulator to protect consumers and identify issues early before they metastasize, said Superintendent Adrienne Harris.
“Through its examinations and investigation, the Department found that BitFlyer USA failed to meet its regulatory obligations both by failing to fully comply with the Department’s Cybersecurity Regulation and by failing to establish and maintain an effective cybersecurity program via the implementation of written policies, as required by the Virtual Currency Regulation,” the NYDFS stated.
BitFlyer must pay the fine within ten days after the effective date of the consent order. It should not “claim, assert, or apply for a tax deduction or tax credit with regard to any US federal, state, or local tax, directly or indirectly, for any portion of the civil monetary penalty,” the regulator outlined. Despite the penalty, the NYDFS highlighted BitFlyer’s ambition to cope with the regulatory issues, showcasing a remediation plan that can make it compliant with the required rules by the year-end.