New York DFS Head Displeased with Cryptocurrency
When the US Treasury Department discussed an idea to create a regulatory sandbox to serve as an incubation for fintech companies, the New York Department of Financial Services (DFS) superintendent Maria T. Vullo responded:
“The idea that innovation will flourish only by allowing companies to evade laws that protect consumers, and which also safeguard markets and mitigate risk for the financial services industry, is preposterous. Toddlers play in sandboxes. Adults play by the rules.”
Not all showed displeasure with the idea. The Office of the Comptroller of the Currency (OCC) supported the plan for the fintech sandbox by accepting licensing applications from firms involved in the banking business. The applications authorize licensees to explore new technologies without having to “work around the regulatory red tape.” Joseph Otting, the Comptroller of the Currency stated:
“Over the past 150 years banks and the federal banking system have been the source of tremendous innovation that has improved banking services and made them more accessible to millions.”
Vullo, in regard to the Comptroller’s Office, stated:
“companies that truly want to create change and thrive over the long-term appreciate the importance of developing their ideas and protecting their customers with a strong state regulatory framework.”
Marco Santori, an advisor for the International Monetary Fund and Chief Legal Officer of Blockchain Company, further added,
“New York has become a crypto backwater in a lot of ways, and not because it takes long to approve licensing applications – it always takes long to approve licensing applications – but because the way the BitLicense was drafted.”
It is possible that Vullo has it wrong. Contrary to her contentions, a sandbox does not necessarily mean that there are no rules or regulations. A sandbox is simply a framework overseen by regulators who are aware of the challenges that companies and projects face and who work with them to mitigate the issues. Vullo’s skewed view may account for why she has allowed only five companies to operate through BitLicense, including Ripple, XRP II, Coinbase, and bitFlyer.
Another question arises, and that is whether the Department of Financial Services opinion should be controlling. After all, the department did not do much to mitigate the harms of the banking crisis while it was going on, and after it as well. As The Nation stated,
“The political impact of the fiscal crisis was felt far beyond conservative circles. The crisis brought about a transformation of the very language and conception of policies, as the rhetoric of fiscal necessity and business acumen replaced a vision of policies as a domain of struggle and negotiation.”
At this point, other departments and agencies involved in the decision making process should adhere to what they think is best and bypass Vullo’s position.