NY regulator warns against Congress overriding state crypto regimes

New York’s head financial services regulator wants Congress to look at her state’s rules around crypto when thinking about a national model and warned against federal laws overriding state regimes. 

“When we go to the Hill, we say we want there to be a state path,” said Adrienne Harris, the New York Department of Financial Service’s superintendent. “We would like for there to be a framework nationally that looks like what New York has, because I think it is proving itself to be a very robust and sustainable regime.”

Harris particularly noted concerns that federal legislation could preempt, or override state regulatory regimes during her appearance today at the Brookings Institution in Washington, D.C.

The recent collapse of FTX hung over the entire event, which also included public remarks by Peter Marton, the NYDFS’ virtual currency chief. FTX.US, notably, never got a BitLicense and consequently couldn’t legally operate in New York.

“They had an application pending, which they noted publicly. And it was pending,” Harris said, when asked about FTX.US’ status by Aaron Klein, a Brookings senior fellow. 

“I want to acknowledge first and foremost that FTX.US was not operating in New York,” said Marton, the NYDFS’ virtual currency chief, in a separate panel. 

The NYDFS BitLicense regime is one of the most stringent in the country, making it a frequent subject of criticism from industry.

Recent proposals for federal regulatory changes around digital assets include developing a federal payments license, instead of the current state-by-state money transmitter licensing that firms, including crypto firms, have to follow. Senators have also proposed greater federal power over exchanges facilitating trades of bitcoin and other virtual assets that could be labelled as digital commodities. Those proposals may allow at least some crypto companies to go to a federal license instead of state licensing like the BitLicense. 

Dennis Kelleher, president and CEO of Better Markets, criticized crypto lobbying in Washington, D.C., saying “the crypto industry has been banging on the door using their political allies as battering rams, to smash the regulators.” He added that FTX and others pushing for a greater role in crypto regulation for the Commodity Futures Trading Commission were  trying to “buy the weakest regulator they could capture.”

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