Superintendent Adrienne Harris took over the state’s Department of Financial Services in January 2022, and she has since expanded on the regulator’s unique regulation of digital assets.
It also regulates banks and insurance firms.
The NYDFS is basically the only prudential regulator [with] virtual asset specific-authority in the country, Harris stated yesterday at the conference in New York.
The regulator issued its first crypto enforcement actions this year against Coinbase and Robinhood Crypto, but it is its recent activity in the banking sector that has crypto proponents concerned.
Signature was experiencing a new-fashioned bank run. The authorities working together have no option but to ensure depositors are protected. If you look at our rules and guidance, you’ll notice that they require strong banking partnerships with well-regulated banks. The notion that we don’t want these banks to exist makes no logical sense, she stated.
Quick take: When New York’s BitLicense went into effect in 2015, it was praised as one of the most onerous, industry-stifling regulations in town.
- It is now being portrayed as a saving grace in the aftermath of large catastrophic disasters.
- Be wise: With it, Harris does not have to establish whether a particular cryptocurrency is a commodity or a security, which is an apparently lower barrier to regulation than, say, the CFTC or the SEC.
What they’re saying: “When you think about the ills that have traversed the market — particularly the crypto market — I think the rules that we have were pretty prophetic, making sure that the majority of that fate did not befall our licensees,” Harris said.
Context: In May 2022, FTX.US applied for a state trust charter, months before the international FTX.com fell insolvent.
The opposition: Harris does not deny that the BitLicense application procedure has been slow.
- “Speed is not the appropriate metric,” she stated. “That’s evidenced by who we didn’t license, right?” FTX, and now many other well-known names.”
The big picture: Other states outside Illinois and California also look to New York as an example.
- In recent weeks, Harris has been discussing the best practices for crypto regulation with people outside of the United States and has plans to travel to both Western Europe and the United Arab Emirates.
What we’re watching: Harris seems to want “real-time supervision” to tighten the screws on cryptocurrency legislation.
She concluded, This notion that regulators should just come in once a year, go through books, and interview staff…was fitting for the 20th-century financial system, but certainly not for the 21st.
