Why Adrienne Harris could win the battle over crypto regulators

by Arthur · April 5, 2023

Adrienne Harris, Superintendent of the New York State Department of Financial Services Christopher Goodney—Getty Images

Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on politics and regulation.

Crypto makes a spectacle of everything it touches, and regulation is no exception. Look no further than Gary Gensler, the lightning rod for the Securities and Exchange Commission, who seems to be reveling in the furor and changed his profile picture to the “deal with it” meme as an April Fool’s joke to Crypto Twitter, which was less than amused. As Gensler and Commodity Futures Trading Commission Chairman Rostin Behnam becomes a household name, at least in households that keep their savings in Trezor wallets, an unlikely figure has climbed the ranks: Adrienne Harris, superintendent of the New York Department of Financial Services.

Harris recently took center stage in March with her department’s controversial takeover of Signature Bank, which drew the ire of many in the crypto industry (and Barney Frank), who accused her of bringing the bank to its knees because of its ties to crypto — an accusation. her office flatly refused. If you rewind to February, Harris’s DFS was the first US agency to launch an offensive against Binance, when it ordered Paxos to stop ordering BUSD, effectively neutering Binance’s self-branded stablecoin ambitions.

For those following the history of the department, which combines many of the oversight responsibilities of the alphabet soup of federal regulators, the aggressive moves were not a surprise. DFS crowned New York as the first state to create a regulatory framework around crypto with the establishment of the BitLicense program in 2015, as well as its willingness to grant trust charters to virtual currency firms such as Paxos and Gemini. While the regime may be criticized for its slow and laborious process, it still stands in stark comparison to the vacuum at the federal level, not to mention the vast majority of states.

When Harris was sworn in in early 2022, she came from an impressive pedigree of government experience, including at the Treasury Department and the Obama administration. She also had a vast amount of corporate experience, particularly with the type of financial technology firms she would regulate.

Her short tenure at DFS has not come without controversy. A significant portion of Crypto Twitter still sees her as one of the main instigators of Operation Chokepoint 2.0, especially as the Signature takeover remains shrouded in uncertainty, but her Department of Financial Services remains one of the only regulators in the country willing to to actually regulate crypto. , and it does so in the world’s financial capital. In February, DFS granted its latest BitLicense to digital asset investment platform eToro, and this week it approved Bakkt’s $155 million acquisition of Apex Crypto.

As Matthew Homer, a former deputy director of DFS, told me, “If you’re a crypto innovator and you want to be regulated — you want this halo that comes with being regulated — you don’t have a lot of options. New York is still the best option.”

I profiled Harris for the latest issue of Fortune, which is available online now and on newsstands this month. Harris will also be speaking crypto this morning at Chainalysis’s Links conference in Manhattan. I’ll be there – come say hi if you are too.

Leo Schwartz
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@leomschwartz