New York Financial Regulator Wants to Lead in Cryptocurrency and Climate Change

New York Financial Regulator Wants to Lead in Cryptocurrency and Climate Change

The head of the New York Financial Regulatory Authority is looking to use the state’s role as a leader in financial services to help set the regulatory agenda nationwide, with a particular focus on regulating the cryptocurrency industry.

The New York financial regulator, which oversees insurance companies and state banks, plays a large role in financial services, with many other states taking the lead in regulation and enforcement. Ms. Harris seeks to bring this leadership role to other areas, including cryptocurrency and climate change.

Ms. Harris, who left a teaching job at the University of Michigan’s Gerald Ford School of Public Policy to take up the role of NYDFS, is the first person of color to hold the position of supervisor. She served as a senior advisor at the Treasury Department and chair of the Obama administration’s financial task force. Then she became a general consultant and head of business development at the US startup real estate company, now called Doma Holdings a company

The supervisor said she helped NYDFS obtain full funding for the first time since it was formed in 2011. The state government, which determines the agency’s funding, has recommended a fiscal year 2023 budget of $480.8 million for NYDFS, up 2.4% from the previous fiscal year.

The agency, which employs about 1,300 people, has employed 110 workers since January, including in insurance and banking units, and has more than 270 jobs, according to Ms. Harris. The agency has also hired more than 25 people this year in its virtual currency unit to regulate the industry.

One of Ms Harris’ main focus is the regulation of emerging financial services products, including cryptocurrencies. Its agency, which oversees 31 crypto firms, in August took its first sector-wide enforcement action, slapped a $30 million fine on the crypto-trading unit of online broker Robinhood Markets. a company

for alleged violations of anti-money laundering and cybersecurity regulations.

The Wall Street Journal spoke with Ms. Harris in her agency’s Wall Street office to find out what prompted her to take on the role and her priorities there. Track edited excerpts.

The Wall Street Journal: What drew you to this position?

Adrian Harris: I’ve been doing a lot of work around fintech because I felt, in our response to the financial crisis, that we were fixing a lot of things that needed to be fixed, but we’re still looking back — and you need to be forward-looking. There’s all this change going on and I’ve been very interested in how the laws work with these new tools and products. So when the file [Obama] Management is over… I moved to California to start an insurance technology company… Once the company expanded, I took advantage of a great opportunity to teach graduate school at the University of Michigan.

The Wall Street Journal: What are some of your goals for the agency?

Mrs. Harris: The department was under-resourced. One of my goals has been to make sure this place is resourced the way it should be – it’s the financial capital of the world and regulators should have the resources to reflect that… We’re hiring like crazy across the board.

One of the advantages of being a government regulator is that you can move quickly and be smart; You can respond to changes in the market. And I think you’ve seen it from us: With encryption, we’ve got stable instructions that have fallback requirements. We were able to do this quickly, while others were still wrangling over who had jurisdiction. And because we’re the financial capital of the world, that makes sense.

The Wall Street Journal: What is your approach to regulating cryptocurrency?

Mrs. Harris: New York had a state banking law before there was a national banking law, which is why Wall Street is here – because the rules of the road here were clear. And I think the same goes for cryptocurrencies. There has been more crypto investment in New York companies than in Silicon Valley companies, and I think that’s because there are clear and strict rules of the road here. And we can set the rules, we can issue direction, we can supervise and we can check, we can enforce, and so it attracts good players and attracts the industry that wants to be here, in the financial capital.

It’s no secret how long it sometimes takes us to license a company, or approve a new product, but speed is not the right metric. It is important that we are operationally efficient and that we do a lot about managing operations and improvements.

But think of the crypto winter and all the money that people lost when these companies collapsed. If speed is the measure, the regulator may have licensed a company less than two weeks later, [but] We didn’t have that problem because we had a deliberate approach on the bank secrecy law, around the internet. So [we] It may not be as fast as people like it to be, but we get the right answer.

We have to tell companies that this is not a “check the box” exercise. This is about risk management. Show us that you are ready to manage the risks of your products; Show us that you have the correct consumer disclosures.

We are currently working on directing virtual currencies to banks. Where some regulators said, “No, banks, they don’t get involved in this at all,” we took a more realistic view, “This is where the market is headed.” Let’s set clear regulatory expectations [for those] Who want to engage in space.

The Wall Street Journal: What are some of your other organizational priorities?

Mrs. Harris: We will soon release our Banking Climate Guidance… It’s a very data-driven approach to risk mitigation and operational flexibility for our regulated banks… It was important to me that it wasn’t an ideological document because I believe as a country we can move quickly and hopefully then become a model for other states , whether it’s red, blue, or purple.

The other thing we’ve done is really take the tension between climate goals, fair lending, and equity goals. One of the worst things we can do is say, here are the requirements for climate regulation and this is causing a bank, for example, not to lend in the Queens area that has been affected [Hurricane] Ida. This is not a good policy outcome.

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write to Mengqi Sun at mengqi.sun@wsj.com

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