WEBVTT - NYDept of Financial Services Superintendent, Adrienne Harris

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<v Speaker 1>Some of the major factors that will define crypto in

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<v Speaker 1>the US, our regulation and cybersecurity. For more on that,

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<v Speaker 1>we are joined by New York's top banking cop, New

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<v Speaker 1>York Department of Financial Services Superintendent Adrian Harris, And you're

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<v Speaker 1>down in DC today. But of course New York has

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<v Speaker 1>been a place where many crypto companies have been able

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<v Speaker 1>to start up and operate. You are an early mover

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<v Speaker 1>on some of the guidelines you saw around more progressive

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<v Speaker 1>parts of the industry, like stable coins. One thing I'm

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<v Speaker 1>wondering is you're seeing fintech companies really take off in

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<v Speaker 1>the stable coin landscape, PayPal stripe. How do you think

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<v Speaker 1>stable coins might become a much bigger part of the

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<v Speaker 1>payment's landscape moving forward, and what's going to take to

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<v Speaker 1>facilitate that.

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<v Speaker 2>I think as we think about stable coins, they are

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<v Speaker 2>obviously becoming more prolific, as you noted, and more and

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<v Speaker 2>more traditional companies are getting involved in the space. For

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<v Speaker 2>us in New York, we've got strong regulations on the books.

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<v Speaker 2>We've added to that with guidance in particular about stable coins.

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<v Speaker 2>We're engaged here in DC with Congress and with international regulators.

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<v Speaker 2>So I think having that transparent framework and those rules

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<v Speaker 2>of the road are really what's going to help both

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<v Speaker 2>facilitate the responsible growth of this space and protect consumers

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<v Speaker 2>and markets at the same time.

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<v Speaker 3>Well, speaking of that space, I'm wondering about the regulatory

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<v Speaker 3>environment and what you see as the role of states

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<v Speaker 3>versus the federal government when it comes to regulating the industry.

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<v Speaker 3>What is the role of the state and what's the

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<v Speaker 3>role of the federal government.

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<v Speaker 2>Yeah, well, let me say we would love nothing more

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<v Speaker 2>than to have a federal partner in this space. But

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<v Speaker 2>as you noted, there is a real role for states

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<v Speaker 2>because we can move so nimbly and stay abreast of

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<v Speaker 2>both opportunities and risks. And I think New York is

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<v Speaker 2>a perfect example where we've been regulating virtual assets for

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<v Speaker 2>almost a decade. We were very early with guidance on

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<v Speaker 2>stable coins and very conservative and rigorous requirements in the space.

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<v Speaker 2>And often when people talk about the states, they talk

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<v Speaker 2>about this race to the bottom. But what we've seen

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<v Speaker 2>is to the contrary, where in New York we have

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<v Speaker 2>the most rigorous standards anywhere in the world been able

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<v Speaker 2>to protect consumers but also create a thriving, healthy, responsible marketplace.

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<v Speaker 3>So how do you create how do you make this

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<v Speaker 3>a feature and not a bug when it comes to

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<v Speaker 3>states pitting themselves against one another. How do you make

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<v Speaker 3>sure people stay in New York and don't move outside

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<v Speaker 3>of the state or outside of the US.

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<v Speaker 2>Yeah, well, what we've seen is having that transparency and rigor.

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<v Speaker 2>When early on people thought it was too onerous, Now

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<v Speaker 2>what they've come to see is it's actually really a

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<v Speaker 2>good housekeeping seal of approval. So saying that you pass

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<v Speaker 2>these rigorous standards, that you can meet the same cybersecurity

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<v Speaker 2>requirements as banks, that you can meet the same BSAAML

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<v Speaker 2>requirements as banks, really is that good housekeeping seal. And

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<v Speaker 2>I think it's good when investors see it. It's good

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<v Speaker 2>when other regulators and other jurisdictions see it. So rather

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<v Speaker 2>than repelling industry to less rigorous regimes and frameworks, what

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<v Speaker 2>we see is it really attracts companies and investment, and

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<v Speaker 2>I think that's a great thing.

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<v Speaker 1>Regulation and then there's enforcement. And I'm curious about what

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<v Speaker 1>you're seeing in terms of potential future cases. Are there

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<v Speaker 1>big cases down the pike for crypto firms, for stable

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<v Speaker 1>coin firms, or even market makers in the space at

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<v Speaker 1>this juncture.

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<v Speaker 2>Yeah, absolutely, I mean I think for us, we really

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<v Speaker 2>make sure we're using the full suite of tools at

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<v Speaker 2>our disposals, so rulemaking, guidance, and then when necessary, enforcement

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<v Speaker 2>And we've brought some big enforcement cases in New York

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<v Speaker 2>one hundred million dollars against coinbase. We got two point

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<v Speaker 2>one billion dollars back for consumers in an enforcement action

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<v Speaker 2>against Gemini Earn. So there's definitely a place for enforcement.

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<v Speaker 2>You will see more from dfs and from other regulators,

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<v Speaker 2>but it should be as a compliment to transparent rulemaking

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<v Speaker 2>and to guidance that we've done at the state level.

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<v Speaker 1>Are there particular problems with the market making space in

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<v Speaker 1>the crypto industry When you're looking at your focus on

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<v Speaker 1>enforcement in particular, what are the issues you're most looking

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<v Speaker 1>out for.

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<v Speaker 2>Yeah, I think the big issues we see with crypto

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<v Speaker 2>in additions in the market making space. I mean, there

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<v Speaker 2>is certainly that potential for fraud, and we've issued guidance

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<v Speaker 2>on market manipulation where we see the biggest areas of

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<v Speaker 2>vulnerability or often around illicit finance or the AMLBSA frameworks

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<v Speaker 2>and cybersecurity, but the market manipulation, fraud, marketing schemes. Those

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<v Speaker 2>kinds of things are also top of mind and why

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<v Speaker 2>we've issued guidance around those areas, and I think you

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<v Speaker 2>will see enforcement from us where necessary.

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<v Speaker 3>Okay, I want to talk a little bit about politics

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<v Speaker 3>because we're just a couple of weeks out from the

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<v Speaker 3>elections here. I know, I don't need to tell you

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<v Speaker 3>that you worked on the Biden Harris transition team back

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<v Speaker 3>in twenty twenty. Are you having conversations with the Harris

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<v Speaker 3>team right now about a role in the administration now?

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<v Speaker 2>I have a wonderful job now in New York State

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<v Speaker 2>where we have a great diversity of institutions that we regulate,

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<v Speaker 2>and really making great policy every day to benefit New

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<v Speaker 2>Yorkers and being a model for the nation and the world.

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<v Speaker 2>So I'm really loving this role.

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<v Speaker 1>You know. One major question is who would be a

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<v Speaker 1>SEC chair in a Harris administration and if there would

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<v Speaker 1>be any change in particular. I'm wondering if you look

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<v Speaker 1>at what's been done, there's been a lot of frustration,

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<v Speaker 1>of course, from the crypto community about this idea of

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<v Speaker 1>regulation by enforcement. Is there anything that you would do

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<v Speaker 1>differently if you were in that spot?

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<v Speaker 2>I think in general, what you've seen from US at

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<v Speaker 2>DFS again is using all the tools that we have

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<v Speaker 2>at our disposal. So I think it's really important to

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<v Speaker 2>write rules and put them through the notice and comment

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<v Speaker 2>period and have that engagements with stakeholders, to use things

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<v Speaker 2>like guidance and FAQs to add additional context and clarity

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<v Speaker 2>and put some meat on the bones as developments continue

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<v Speaker 2>in the space. And then again where necessary, where people

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<v Speaker 2>violate those transparent and rigorous rules, then you also have

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<v Speaker 2>enforcement as a tool as a deterrent to get restitution

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<v Speaker 2>for consumers and to meet other public policy goals. So

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<v Speaker 2>in my mind, really leveraging the full suite of regulatory

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<v Speaker 2>tools is what a regulator should do and and a

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<v Speaker 2>really successful model for us.

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<v Speaker 1>In New York, you know, New York City, financial capital

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<v Speaker 1>of the world. When it comes to the rules that

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<v Speaker 1>large banks are about to face, there seems to be

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<v Speaker 1>this standstill among regulators around this long awaited capital plan.

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<v Speaker 1>What do you make of that gridlock?

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<v Speaker 2>Yeah, I think you know, these are really hard problems

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<v Speaker 2>when you think about capital rules or any rules where

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<v Speaker 2>you're trying to harmonize international requirements with things here in

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<v Speaker 2>the US. So it is quite complex, But I think

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<v Speaker 2>it speaks to the need for continued engagement between government actors,

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<v Speaker 2>industry academics. It's something we really try to model at

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<v Speaker 2>DFS as making sure we're engaging with all of our stakeholders,

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<v Speaker 2>surfacing all the data that we need to make the

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<v Speaker 2>best policy decisions. So I'm hopeful that this gridlock will

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<v Speaker 2>release soon and we can have good rules on the

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<v Speaker 2>books for the banks here in the US.

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<v Speaker 3>Well, before we let you go, we're going everywhere with you,

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<v Speaker 3>and we appreciate your time today, But I want to

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<v Speaker 3>get an update from you about what consumers could think

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<v Speaker 3>about the insurance crisis that's threatening ubers and and lifts

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<v Speaker 3>here in New York City. What message do you have

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<v Speaker 3>for them about the viability of the insurance company moving forward,

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<v Speaker 3>or how they will be protected New Yorkers if they

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<v Speaker 3>get into one of these vehicles.

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<v Speaker 2>Yeah. Absolutely, It's a huge problem that we've been dealing with.

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<v Speaker 2>You know, we have large companies in the livery insurance

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<v Speaker 2>space that have been insolvent for decades. Under my tenure

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<v Speaker 2>at DFS, we're confronting that head on, issuing the first

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<v Speaker 2>examination of some of those companies in nearly forty years,

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<v Speaker 2>making sure they have a remediation plan so that they

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<v Speaker 2>can be well capitalized, they can pay claims in a

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<v Speaker 2>timely manner. We're working on a number of legislative proposals

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<v Speaker 2>to shore up the market and bring competition to that

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<v Speaker 2>space so that passengers can be protected, drivers have the

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<v Speaker 2>insurance they need, and that it's an affordable option for them,

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<v Speaker 2>so that we can have that thriving transportation ecosystem in

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<v Speaker 2>New York. But I think it's been left dormant for

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<v Speaker 2>far too long. But under my tenure, we are tackling

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<v Speaker 2>it head on.