New York Financial Regulator Wants to Lead on Crypto, Climate Change


The head of New York’s financial regulator is looking to use the state’s role as a financial-services leader to help set the regulatory agenda nationwide, with a particular focus on bringing order to the cryptocurrency industry.

New York’s financial regulator, which oversees insurance companies and state-chartered banks, already plays an outsize role in financial services, with many other states following its lead on regulation and enforcement. Ms. Harris seeks to bring that leadership role to other areas, including crypto and climate change.

Ms. Harris, who left a teaching job at the University of Michigan’s Gerald Ford School of Public Policy to take the NYDFS role, is the first person of color to hold the superintendent position. She served as a senior adviser at the Treasury Department and as head of an Obama administration financial task force. She then became general counsel and chief business development officer of real-estate-technology startup States Title, now called Doma Holdings Inc.

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

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

One major focus for Ms. Harris is regulating emerging financial-services products, including cryptocurrency. Her agency, which supervises 31 crypto companies, in August took its first enforcement action involving the sector, imposing a $30 million fine on the cryptocurrency trading unit of online brokerage Robinhood Markets Inc. 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 this role and her priorities there. Edited excerpts follow.

WSJ: What drew you to this position?

Adrienne Harris: I’ve been doing a lot of work around financial technology because I felt like, in our response to the financial crisis, we were fixing a lot of stuff that needed to be fixed, but we were still very backward-looking—and you need to be forward-looking. There’s all this change happening and I was super-interested in how the laws were going to work with these new instruments and products. So when the [Obama] administration ended…I moved to California to start an insurtech firm…Once the company had scaled, I took advantage of a great opportunity to teach grad school at the University of Michigan.

WSJ: What are some of your goals for the agency?

Ms. Harris: The department has been 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 its regulator should have the resources to reflect that…We are hiring like mad across the board.

One of the benefits of being a state regulator is that you can move fast and be nimble; you can respond to changes in the marketplace. And I think you’ve seen that from us: With crypto, we got stablecoins guidance that has reserve requirements. We were able to do that quickly, while others are still battling it out about who has jurisdiction. And because we’re the financial capital of the world, it’s meaningful.

WSJ: What’s your approach to regulating cryptocurrency?

Ms. Harris: New York had banking law in the state before there was a national banking law, and that’s why Wall Street was here—because the rules of the road here were clear. And I think the same is true for crypto. There was more crypto investment in New York companies than even in Silicon Valley companies, and I think it’s because there are clear, rigorous rules of the road here. And we can make rules, we can issue guidance, we supervise and examine, and we can bring enforcement and so that attracts the good actors and it attracts the industry that wants to be here, in the financial capital.

It’s not a secret about how long it takes us sometimes to license a company, or to approve a new product, but speed is not the right metric. It’s important that we’re operationally efficient and we’ve been doing a lot around process management and improvements.

But think about the crypto winter and all the money that people lost when these companies went under. If speed was the metric, a regulator might have licensed a company that then went under two weeks later, [but] we didn’t have that problem because we have a deliberate approach about the Bank Secrecy Act, about cyber. So [we] may not be as fast as people like, but we get the answer right.

We have to say to companies that this is not a “check the box” exercise. This is about risk management. Show us that you are equipped to manage the risk of the products you are offering; show us that you have the right consumer disclosures.

We’re currently working on virtual-currency guidance for banks. Where some regulators have said, “No, banks, don’t engage in this at all,” we’ve taken a more realistic view of, “This is where the market is headed.” Let’s lay out clear regulatory expectations [for those] that want to engage in the space.

WSJ: What are some of your other regulatory priorities?

Ms. Harris: We’ll soon issue our banking climate guidance…It’s a very data-driven approach to risk mitigation, operational resiliency for our regulated banks…It was important to me that it was not an ideological document because I think as a state we can move quickly and hopefully then become a model for other states, whether they’re red, blue or purple.

The other thing that we’ve done is really calling out the tension between climate goals and fair-lending and equity goals. One of the worst things we could do is say, here are climate regulatory requirements and that causes a bank, for instance, to not lend in the area in Queens that was impacted by [Hurricane] Ida. That’s not a good policy outcome.

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