On Tuesday, Robinhood cryptocurrency trading division was hit with a $30 million punishment by the New York State Department of Financial Services (NYDFS) for suspected breaches of AML, consumer, and cybersecurity regulations.
As far as we know, this is the first time the NYDFS has initiated enforcement action against a cryptocurrency-focused business.
The Wall Street Journal reported on Tuesday that the New York State Department of Financial Services fined Robinhood Crypto $30 million after investigating the company’s compliance. The banking watchdog claims that Robinhood did not take enough precautions to prevent cyberattacks or comply with applicable anti-money laundering regulations.
The government agency claims that the corporation did not upgrade to a transaction monitoring system with enough capacity as the number of users increased. Also, Robinhood Crypto was dinged because its site lacked a phone number where aggrieved clients might be reached.
According to New York Department of Financial Services Superintendent Adrienne A. Harris, “as its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance, resulting in significant violations of the Department’s anti-money laundering and cybersecurity regulations.”
In 2021, when the company was experiencing explosive expansion in response to a surge in demand for equities and cryptocurrencies, Robinhood reported the enforcement inquiry by NYDFS in a filing with the SEC. These problems multiplied as the firm expanded.
Robinhood has requested for a license from the New York Department of Financial Services (NYDFS), stating it is in full compliance with anti-money laundering and cybersecurity legislation despite these deficiencies.
The cryptocurrency trading division of Robinhood is the first U.S. business to be fined by the New York Department of Financial Services (NYDFS) for violations of its virtual currency, money transmitter, transaction monitoring, and cybersecurity rules.
In addition to paying a fine, Robinhood Crypto must hire a third-party expert to evaluate whether or not it follows state legislation.
Robinhood has allowed cryptocurrency trading since 2018, but clients had to convert their cryptocurrency holdings to conventional currency before they could withdraw them.
As the cryptocurrency market flourished in the middle of 2021, the retail trading firm dove further in, ultimately launching a division devoted to digital assets called Robinhood Crypto. Along with the launch of its trading platform, Robinhood has unlocked its cryptocurrency wallet, enabling users to finally withdraw their coins from inside the app’s previously restrictive environment.
To no avail, Robinhood has been unable to withstand the storm that has befallen crypto and internet businesses in recent months. The publicly listed company had a sales loss of almost 43% in the first quarter of this year. Similarly, Robinhood’s sluggish development and economic uncertainties led to the reduction of a large section of the company’s personnel.