In a significant development for the digital payments landscape, Block Inc., the company behind Cash App, has agreed to a $40 million settlement with the New York Department of Financial Services (NYDFS) concerning alleged compliance failures tied to Anti-Money Laundering (AML) measures and cryptocurrency operations. This settlement, reported by Bloomberg on April 10, sheds light on the increased scrutiny facing the fintech and cryptocurrency sectors.
The NYDFS investigation revealed that Block purportedly violated consumer protection laws by failing to conduct adequate due diligence on its customers. Critics highlighted that the company was slow to report suspicious transactions and insufficiently screened high-risk Bitcoin transactions. While Block has acknowledged working alongside the NYDFS to resolve these concerns, the company has not admitted to any wrongdoing.
Founded by internet entrepreneur and Bitcoin proponent Jack Dorsey in 2009, Block has been in settlement negotiations with the NYDFS since the previous year, as indicated by filings with the U.S. Securities and Exchange Commission (SEC). This latest settlement follows an earlier $80 million penalty paid by Block to various state regulators for alleged violations concerning its AML protocols.
Excerpts of Block Inc.’s February Form 10K filing with the SEC. Source: SEC
Despite the regulatory challenges, Block’s overall business performance has shown resilience. Company revenue rose by approximately 4.5% year-over-year, reaching $6.03 billion, and per-share earnings increased by 51% to $0.71. Additionally, the company’s merchant gross payment volume saw a 10% increase, totaling $61.95 billion. The Cash App platform has been a particular driver of growth, reporting a gross profit of $1.38 billion in the fourth quarter and boasting over 57 million monthly transacting users in early 2024.
The Cash App’s ability to facilitate Bitcoin purchases since 2018 has positioned it as a key player in the digital currency space. Recent integration of crypto accounting software, TaxBit, further enhances the user experience by simplifying the tracking and reporting of crypto-related transactions.
As Block continues to navigate regulatory challenges, the company’s growth trajectory and the ongoing popularity of its Cash App platform suggest a complex interplay between compliance requirements and innovation in the digital payments arena. The outcome of these developments will be closely monitored by stakeholders and regulatory bodies alike.
