The New York Department of Financial Services (NYDFS) and Genesis Global Trading have reached a settlement.
According to a report, the subsidiary of the renowned crypto conglomerate Digital Currency Group (DCG), will pay a fine of $8 million and forfeit its BitLicense, thereby ceasing operations.
The settlement
The New York regulator revealed that its investigation into the firm led to the discovery of major shortcomings in its cybersecurity and anti-money laundering protocols.
A spokesperson for Genesis said that the company had ended its operations in New York in September 2023 and it is now in the process of winding down its business voluntarily.
The NYDFS had issued Genesis Global Trading Inc. a virtual currency license. The spokesperson said that the company had taken several measures to deal with the historical deficiencies.
They also added that they were pleased to have resolved the issue. The settlement dictates that Genesis Global Trading will no longer have its BitLicense.
This is a crypto business registration applicable in New York. The company will also cease its operations in New York and would have to pay a penalty of $8 million.
DFS
DFS’ Superintendent Adrienne Harris talked about the company’s failure to maintain a robust compliance framework and highlighted the potential risks to the firm as well as its clients.
Harris said that since Genesis Global Trading had not maintained a functional compliance program, it had not met the regulatory requirements of the Department, thereby exposing its clients to potential threats.
Genesis is one of the prominent portfolio companies that have helped DCG in becoming a major player in the US crypto industry.
However, the crypto market collapse that occurred back in 2022 saw the company get embroiled in numerous issues due to increased regulatory scrutiny.
Eventually, it ended up filing for bankruptcy in January 2023. The company was not directly implicated in the bankruptcy.
In addition, it was not involved in the legal challenges that its parent company, DCG, faced. However, the said legal challenges did lead to repercussions for Genesis Global Trading.
The problems
For instance, the company announced in September last year that it was shutting down its over-the-counter trading platform in the United States.
The actions of the DFS against Genesis Global Trading have come at a very important moment in terms of crypto regulation in New York.
The state has been very proactive in terms of crypto regulation and oversight in the country and DFS is the only regulator that has developed a comprehensive framework for the industry.
This move also comes after the DFS approved the Gemini Earn program, which was launched by the Gemini crypto exchange.
The exchange also holds a BitLicense and later encountered legal challenges. The settlement of Genesis with NYDFS reflects the company’s remedial efforts and cooperation.
However, it is also a pivotal moment in the ongoing crypto oversight and regulation discussion.
It highlights the need for robust compliance mechanisms in the inherently risk and rapidly evolving domain of digital currencies.