Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insight on policy and regulation.
Crypto makes a spectacle of everything it touches, and regulation is no exception. Look no further than Gary Gensler, the lightning rod leader of the Securities and Exchange Commission, who seems to revel in the outrage and changed his profile picture to the “deal with it” meme as an April Fools’ Day troll to Crypto Twitter, which was less than amused. As Gensler and Commodity Futures Trading Commission Chairman Rostin Behnam become household names, at least in households that hold their savings in Trezor wallets, an unlikely figure has been climbing 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 kneecapping the bank because of its ties to crypto—an accusation her office vehemently denied. If you rewind back to February, Harris's DFS was the first U.S. agency to mount 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 its 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 at the beginning of 2022, she came from an impressive pedigree of governmental experience, including at the Treasury Department and the Obama administration. She also had a prodigious amount of corporate experience, especially with the type of financial technology firms that she would be regulating.
Her brief tenure at DFS has not come without controversy. A significant portion of Crypto Twitter still views her as a principal instigator of Operation Chokepoint 2.0, especially as the Signature takeover remains shrouded in uncertainties, but her Department of Financial Services remains one of the sole regulators in the country that is willing to actually regulate crypto, and it does so in the financial capital of the world. In February, DFS granted its latest BitLicense to the digital assets investment platform eToro, and this week it approved Bakkt’s $155 million acquisition of Apex Crypto.
As Matthew Homer, a former DFS deputy superintendent, 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 talking crypto this morning at Chainalysis’s Links conference in Manhattan. I’ll be there—come say hello if you are as well.
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
