Block Inc., the parent company of Cash App and Square, is in discussions with the New York State Department of Financial Services (NYDFS) regarding compliance issues related to its Bitcoin operations and anti-money laundering (AML) programs.
Regulatory Challenges for Block
Block has faced increased regulatory scrutiny in recent years, including multiple investigations into its AML policies and tax compliance. Between January 2021 and March 2023, financial regulators across several U.S. states reviewed the company’s AML protocols and identified compliance deficiencies under the Bank Secrecy Act (BSA).
Settlement with State Regulators
In January 2024, Block reached an $80 million settlement with multiple state money transmission regulators, agreeing to appoint an independent consultant to oversee AML reforms. However, the NYDFS was not part of this agreement and has proposed its own separate settlement terms. While Block has set aside funds to address the issue, it stated in its SEC filing that the financial impact is not material to its overall financial performance.
Block's New Strategy in Bitcoin Mining
Despite regulatory challenges, Block is doubling down on Bitcoin mining. In a November 2024 shareholder letter, the company announced plans to scale down its music streaming service, TIDAL, and wind down its decentralized web project, TBD, to focus on Bitcoin infrastructure. Through its Proto initiative, first announced in 2021, Block is expanding into mining hardware development. In July 2024, Block partnered with Bitcoin miner Core Scientific to supply its new 3-nanometer (3nm) mining ASICs. The company has also launched a Mining Development Kit (MDK) Beta program, enabling builders and miners to collaborate on infrastructure for a decentralized mining sector.
The future of Block largely depends on its ability to handle regulatory challenges, and the company is actively focusing on technology development in the mining sector to strengthen its market position.
