Is BitPay Failing to Meet the Standards for Cybersecurity and Anti-Money Laundering Regulations?

According to reports, an investigation has found that BitPay’s cybersecurity and anti money laundering plans do not comply with the regulations of the New York State Department of Financial Services. After regulatory authorities stated that the company had failed to ensure compliance with anti money laundering laws and cybersecurity regulations, BitPay and the New York State Department of Financial Services (NYSDFS) reached a settlement on March 16th, resulting in an underreported settlement agreement.

BitPay pays $1 million to the New York Financial Services department

BitPay, the online payment processing company, has recently come under fire for not complying with the state of New York’s financial regulations regarding cybersecurity and anti-money laundering laws. An investigation found that BitPay’s cybersecurity and anti-money laundering plans were not up to par according to the New York State Department of Financial Services (NYSDFS). This resulted in a settlement agreement between the company and the regulatory authorities on March 16th.

Background Information on BitPay

BitPay is a well-known payment processor for various cryptocurrencies, including Bitcoin, Bitcoin Cash, and Ethereum. The company was founded in 2011 and has since made it easier for merchants to accept cryptocurrency payments. BitPay processes more than $1 billion annually and has raised more than $70 million in funding from investors.

The Investigation into BitPay

In early 2021, the NYSDFS launched an investigation into BitPay to determine whether the company was complying with the state’s financial regulations regarding cybersecurity and anti-money laundering. The investigation found that BitPay had failed to ensure compliance with these regulations.
The cybersecurity failures included BitPay’s lack of controls to prevent and detect unauthorized access to its systems, software, and data. Additionally, BitPay was found to have been using outdated and unsupported software, which made its systems vulnerable to cyber-attacks.
The failure to meet anti-money laundering regulations centered around BitPay’s lack of proper Know Your Customer (KYC) and Customer ID programs. These programs require businesses to verify their customers’ identities and ensure they are not using the platform for fraudulent or criminal activity.

The Settlement Agreement

After being found to have failed to comply with these regulations, BitPay and NYSDFS reached a settlement on March 16th, resulting in an underreported settlement agreement. The agreement requires BitPay to pay a fine of $507,000, discontinue any business operations with customers or trade in New York, and develop and implement a comprehensive cybersecurity and anti-money laundering compliance program.
In a statement, Superintendent of Financial Services Linda A. Lacewell stated that, “DFS will continue to take swift action to protect consumers and ensure that virtual currency businesses put in place the necessary measures to prevent illegal activity.”

What This Means for BitPay and Its Customers

This settlement agreement will significantly impact BitPay’s operations in New York. The company is required to pay a hefty fine and cease any business operations in the state. The requirement to develop and implement a comprehensive cybersecurity and anti-money laundering compliance program will also be costly and time-consuming.
This should serve as a warning to other payment processors and businesses that operate in the virtual currency space. Compliance with cybersecurity and anti-money laundering regulations is essential to ensure the safety and security of customers and prevent fraud and other illicit activities.

Conclusion

The investigation into BitPay’s compliance with cybersecurity and anti-money laundering regulations found that the company had failed to meet these standards. The resulting settlement agreement requires the company to pay a fine, discontinue any business operations in New York, and develop and implement a comprehensive compliance program. This serves as a lesson to other businesses in the virtual currency space that compliance with these regulations is crucial.

FAQs

1. What is BitPay, and what does it do?
BitPay is a payment processor for various cryptocurrencies, including Bitcoin, Bitcoin Cash, and Ethereum. The company was founded in 2011 and has since made it easier for merchants to accept cryptocurrency payments.
2. What were the cybersecurity and anti-money laundering failures found in BitPay’s operations?
The cybersecurity failures included BitPay’s lack of controls to prevent and detect unauthorized access to its systems, software, and data. The failure to meet anti-money laundering regulations centered around BitPay’s lack of proper Know Your Customer (KYC) and Customer ID programs.
3. What was the outcome of the investigation into BitPay’s compliance with regulations?
The resulting settlement agreement required BitPay to pay a fine, discontinue any business operations in New York, and develop and implement a comprehensive compliance program.