Speaker 1: Some of the major factors that will define crypto in
Speaker 1: the US, our regulation and cybersecurity. For more on that,
Speaker 1: we are joined by New York's top banking cop, New
Speaker 1: York Department of Financial Services Superintendent Adrian Harris, And you're
Speaker 1: down in DC today. But of course New York has
Speaker 1: been a place where many crypto companies have been able
Speaker 1: to start up and operate. You are an early mover
Speaker 1: on some of the guidelines you saw around more progressive
Speaker 1: parts of the industry, like stable coins. One thing I'm
Speaker 1: wondering is you're seeing fintech companies really take off in
Speaker 1: the stable coin landscape, PayPal stripe. How do you think
Speaker 1: stable coins might become a much bigger part of the
Speaker 1: payment's landscape moving forward, and what's going to take to
Speaker 1: facilitate that.
Speaker 2: I think as we think about stable coins, they are
Speaker 2: obviously becoming more prolific, as you noted, and more and
Speaker 2: more traditional companies are getting involved in the space. For
Speaker 2: us in New York, we've got strong regulations on the books.
Speaker 2: We've added to that with guidance in particular about stable coins.
Speaker 2: We're engaged here in DC with Congress and with international regulators.
Speaker 2: So I think having that transparent framework and those rules
Speaker 2: of the road are really what's going to help both
Speaker 2: facilitate the responsible growth of this space and protect consumers
Speaker 2: and markets at the same time.
Speaker 3: Well, speaking of that space, I'm wondering about the regulatory
Speaker 3: environment and what you see as the role of states
Speaker 3: versus the federal government when it comes to regulating the industry.
Speaker 3: What is the role of the state and what's the
Speaker 3: role of the federal government.
Speaker 2: Yeah, well, let me say we would love nothing more
Speaker 2: than to have a federal partner in this space. But
Speaker 2: as you noted, there is a real role for states
Speaker 2: because we can move so nimbly and stay abreast of
Speaker 2: both opportunities and risks. And I think New York is
Speaker 2: a perfect example where we've been regulating virtual assets for
Speaker 2: almost a decade. We were very early with guidance on
Speaker 2: stable coins and very conservative and rigorous requirements in the space.
Speaker 2: And often when people talk about the states, they talk
Speaker 2: about this race to the bottom. But what we've seen
Speaker 2: is to the contrary, where in New York we have
Speaker 2: the most rigorous standards anywhere in the world been able
Speaker 2: to protect consumers but also create a thriving, healthy, responsible marketplace.
Speaker 3: So how do you create how do you make this
Speaker 3: a feature and not a bug when it comes to
Speaker 3: states pitting themselves against one another. How do you make
Speaker 3: sure people stay in New York and don't move outside
Speaker 3: of the state or outside of the US.
Speaker 2: Yeah, well, what we've seen is having that transparency and rigor.
Speaker 2: When early on people thought it was too onerous, Now
Speaker 2: what they've come to see is it's actually really a
Speaker 2: good housekeeping seal of approval. So saying that you pass
Speaker 2: these rigorous standards, that you can meet the same cybersecurity
Speaker 2: requirements as banks, that you can meet the same BSAAML
Speaker 2: requirements as banks, really is that good housekeeping seal. And
Speaker 2: I think it's good when investors see it. It's good
Speaker 2: when other regulators and other jurisdictions see it. So rather
Speaker 2: than repelling industry to less rigorous regimes and frameworks, what
Speaker 2: we see is it really attracts companies and investment, and
Speaker 2: I think that's a great thing.
Speaker 1: Regulation and then there's enforcement. And I'm curious about what
Speaker 1: you're seeing in terms of potential future cases. Are there
Speaker 1: big cases down the pike for crypto firms, for stable
Speaker 1: coin firms, or even market makers in the space at
Speaker 1: this juncture.
Speaker 2: Yeah, absolutely, I mean I think for us, we really
Speaker 2: make sure we're using the full suite of tools at
Speaker 2: our disposals, so rulemaking, guidance, and then when necessary, enforcement
Speaker 2: And we've brought some big enforcement cases in New York
Speaker 2: one hundred million dollars against coinbase. We got two point
Speaker 2: one billion dollars back for consumers in an enforcement action
Speaker 2: against Gemini Earn. So there's definitely a place for enforcement.
Speaker 2: You will see more from dfs and from other regulators,
Speaker 2: but it should be as a compliment to transparent rulemaking
Speaker 2: and to guidance that we've done at the state level.
Speaker 1: Are there particular problems with the market making space in
Speaker 1: the crypto industry When you're looking at your focus on
Speaker 1: enforcement in particular, what are the issues you're most looking
Speaker 1: out for.
Speaker 2: Yeah, I think the big issues we see with crypto
Speaker 2: in additions in the market making space. I mean, there
Speaker 2: is certainly that potential for fraud, and we've issued guidance
Speaker 2: on market manipulation where we see the biggest areas of
Speaker 2: vulnerability or often around illicit finance or the AMLBSA frameworks
Speaker 2: and cybersecurity, but the market manipulation, fraud, marketing schemes. Those
Speaker 2: kinds of things are also top of mind and why
Speaker 2: we've issued guidance around those areas, and I think you
Speaker 2: will see enforcement from us where necessary.
Speaker 3: Okay, I want to talk a little bit about politics
Speaker 3: because we're just a couple of weeks out from the
Speaker 3: elections here. I know, I don't need to tell you
Speaker 3: that you worked on the Biden Harris transition team back
Speaker 3: in twenty twenty. Are you having conversations with the Harris
Speaker 3: team right now about a role in the administration now?
Speaker 2: I have a wonderful job now in New York State
Speaker 2: where we have a great diversity of institutions that we regulate,
Speaker 2: and really making great policy every day to benefit New
Speaker 2: Yorkers and being a model for the nation and the world.
Speaker 2: So I'm really loving this role.
Speaker 1: You know. One major question is who would be a
Speaker 1: SEC chair in a Harris administration and if there would
Speaker 1: be any change in particular. I'm wondering if you look
Speaker 1: at what's been done, there's been a lot of frustration,
Speaker 1: of course, from the crypto community about this idea of
Speaker 1: regulation by enforcement. Is there anything that you would do
Speaker 1: differently if you were in that spot?
Speaker 2: I think in general, what you've seen from US at
Speaker 2: DFS again is using all the tools that we have
Speaker 2: at our disposal. So I think it's really important to
Speaker 2: write rules and put them through the notice and comment
Speaker 2: period and have that engagements with stakeholders, to use things
Speaker 2: like guidance and FAQs to add additional context and clarity
Speaker 2: and put some meat on the bones as developments continue
Speaker 2: in the space. And then again where necessary, where people
Speaker 2: violate those transparent and rigorous rules, then you also have
Speaker 2: enforcement as a tool as a deterrent to get restitution
Speaker 2: for consumers and to meet other public policy goals. So
Speaker 2: in my mind, really leveraging the full suite of regulatory
Speaker 2: tools is what a regulator should do and and a
Speaker 2: really successful model for us.
Speaker 1: In New York, you know, New York City, financial capital
Speaker 1: of the world. When it comes to the rules that
Speaker 1: large banks are about to face, there seems to be
Speaker 1: this standstill among regulators around this long awaited capital plan.
Speaker 1: What do you make of that gridlock?
Speaker 2: Yeah, I think you know, these are really hard problems
Speaker 2: when you think about capital rules or any rules where
Speaker 2: you're trying to harmonize international requirements with things here in
Speaker 2: the US. So it is quite complex, But I think
Speaker 2: it speaks to the need for continued engagement between government actors,
Speaker 2: industry academics. It's something we really try to model at
Speaker 2: DFS as making sure we're engaging with all of our stakeholders,
Speaker 2: surfacing all the data that we need to make the
Speaker 2: best policy decisions. So I'm hopeful that this gridlock will
Speaker 2: release soon and we can have good rules on the
Speaker 2: books for the banks here in the US.
Speaker 3: Well, before we let you go, we're going everywhere with you,
Speaker 3: and we appreciate your time today, But I want to
Speaker 3: get an update from you about what consumers could think
Speaker 3: about the insurance crisis that's threatening ubers and and lifts
Speaker 3: here in New York City. What message do you have
Speaker 3: for them about the viability of the insurance company moving forward,
Speaker 3: or how they will be protected New Yorkers if they
Speaker 3: get into one of these vehicles.
Speaker 2: Yeah. Absolutely, It's a huge problem that we've been dealing with.
Speaker 2: You know, we have large companies in the livery insurance
Speaker 2: space that have been insolvent for decades. Under my tenure
Speaker 2: at DFS, we're confronting that head on, issuing the first
Speaker 2: examination of some of those companies in nearly forty years,
Speaker 2: making sure they have a remediation plan so that they
Speaker 2: can be well capitalized, they can pay claims in a
Speaker 2: timely manner. We're working on a number of legislative proposals
Speaker 2: to shore up the market and bring competition to that
Speaker 2: space so that passengers can be protected, drivers have the
Speaker 2: insurance they need, and that it's an affordable option for them,
Speaker 2: so that we can have that thriving transportation ecosystem in
Speaker 2: New York. But I think it's been left dormant for
Speaker 2: far too long. But under my tenure, we are tackling
Speaker 2: it head on.