New York BitLicense ups customer service requirements for digital asset firms

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The regulator in charge of the New York BitLicense for digital asset firms has decided to toughen its stance on customer service measures, introducing new mandatory procedures, including maintaining a contact number monitored by a human, keeping customers informed about any request or complaint, and providing additional frequently asked question (FAQ) information.

Last week, the New York State Department of Financial Services (DFS) announced it would impose new customer service standards for DFS-regulated virtual currency entities (VCEs) and monitor their implementation.

The DFS set out detailed requirements for VCE phone and electronic communications, transparency and online FAQ posting. Beginning November 1, 2024, VCEs will need to provide records of their policies and procedures and the requests and complaints they receive, along with resolution times. Based on these records, the DFS will assess the adequacy and efficiency of customer service policies.

“VCEs must address and resolve customer service requests and complaints in a timely and fair manner… a VCE’s policies and procedures with regard to customer service requests and complaints are unlikely to be sufficient unless they effectively address the issues and incorporate the mechanisms outlined here,” wrote Adrienne Harris, Superintendent of Financial Services at the DFS.

Digital asset firms operating in New York have been required to apply for a BitLicense through the DFS since 2015, with current licensees including BitPay, Circle, Coinbase (NASDAQ: COIN), Gemini, Paxos, and PayPal (NASDAQ: PYPL).

Previously, BitLicense requirements included anti-money laundering (AML) compliance programs, keeping detailed transaction records and financial statements, cybersecurity programs tailored to the unique risks of digital currencies, capital requirements to ensure financial stability and regular audits and examinations by the DFS.

The new requirements are largely common-sense customer service procedures widely used across businesses and industries, but clearly, the DFS felt that enough VCEs were not taking the measures to make them a mandatory part of BitLicense standards.

Specifics include requiring “human customer service representatives” to be available during business hours and customers to be connected to voicemail during off hours; receipt of electronic communications should be automatically acknowledged with an estimated response time; FAQs should be accessible to viewers who do not hold an account with the company; and customers should be informed immediately if they are interacting with artificial intelligence (AI) rather than a human.

The DFS also noted that, in its supervisory experience, “the ongoing provision of timely and fair customer service requires diligent monitoring and quality assurance by the VCE.” This includes VCEs specifying the individual/individuals responsible for the customer service and complaint policies and procedures, tracking each customer service request or complaint, providing a mechanism to solicit feedback from the customer regarding customer satisfaction, and developing a plan to remedy failure or ineffectiveness within a reasonable timeframe.

“Consumers have a right to a transparent and timely process for resolving complaints and answering questions, irrespective of the company or product in question,” said Superintendent Harris in a November 30 statement. “This guidance outlines clear expectations for a positive customer experience, which benefits both consumers and business.”

In order to enforce the new procedures, VCEs will be required to provide, both during examinations and at DFS request, a “quarterly tabulation” of the number of customer service requests and complaints received via phone, email, chat, or complaint form; the average time from receipt to resolution of the requests and complaints; and the firm’s customer service and complaint policies and procedures. This reporting will begin in the third quarter of 2024.

DFS responding to criticism

The DFS suddenly upping its standards for VCEs doesn’t come completely out of the blue.

Earlier this year, the Office of the New York Comptroller, Thomas DiNapoli, revealed concerns over the management of the BitLicense scheme.

In a 57-page report issued on January 2, the Comptroller examined whether the DFS provided adequate oversight of the BitLicense application, supervision, and examination process to ensure compliance with New York regulations.

DiNapoli concluded that he had only “limited assurance” that the DFS adequately performed its oversight responsibilities, with his primary concerns relating to a lack of thoroughness regarding a range of security checks of potential BitLicensees.

Thursday’s sudden introduction of new customer service standards may be a response to such critiques, and potentially the beginning of tougher approach to digital asset oversight in the state of New York.

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