[1]https://nymag.com/intelligencer/2022/03/adrienne-harris-is-cryptos-m
   ost-powerful-regulator.html#:~:text=birth%20of%20cryptocurrency-,%2C,-i
   t%20was%20supposed
   THE MONEY GAME MAR. 30, 2022
   Crypto’s Most Powerful Regulator Is Here Adrienne Harris, New York’s
   financial watchdog, has enormous sway over the industry’s future.
   
   By Kevin T. Dugan, staff writer at Intelligencer, who covers money and
   business
   
   Photo: Victor Llorente
   Thirteen years after the birth of cryptocurrency, it was supposed to be
   time for Washington to rein it in. Instead, the White House punted, and
   the Securities and Exchange Commission is still hashing out how it’s
   going to oversee the $2 trillion industry. State watchdogs have filled
   that vacuum, making Adrienne Harris, the head of the New York State
   Department of Financial Services, by default the most powerful crypto
   regulator in the country.
   While states such as Florida and Wyoming have adopted a laissez-faire
   approach to regulation, attracting a sizable chunk of the booming
   industry, more money and jobs are still flowing into New York than any
   other city, making it the de facto crypto capital of the U.S. “There’s
   a misconception that having rigorous regulation turns off innovative
   companies,” Harris tells me during an hour-long interview at her office
   looking out onto the Statue of Liberty last month. “That hasn’t been
   our experience here.”
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   Harris was tapped as the first Black woman to lead DFS last year. She
   came into her position after a turn working in Silicon Valley and
   representing Wall Street banks, a résumé that critics have used to
   paint her as too close to the industries she is regulating. She’s eager
   to dispel any criticism that she’s soft as a regulator, especially when
   it comes to crypto. Harris says she’s looking to expand the agency’s
   remit, hire new regulators, and possibly watch over lending and asset
   management in decentralized finance, a.k.a. DeFi, one of the
   fastest-growing crypto industries, which has been prone to very large
   hacks.
   The agency’s power over the industry lies mostly with the BitLicense, a
   required if unloved permit for crypto exchanges to operate within state
   lines. When it was first introduced in 2014, it was meant to be a model
   for the country, but the crypto industry has attacked the license for
   being too strict, limiting what people can trade, and requiring
   expensive anti-money-laundering operations, which, it should be noted,
   most traditional financial institutions are required to maintain. For
   Harris, the problem isn’t that it’s too restrictive — it’s that the
   process of getting one, which has stretched years for some companies,
   is too slow. “If you think about the companies that are BitLicensees,
   and even the companies in the queue, having the imprimatur of ‘Have you
   passed regulatory muster with a stringent regulatory regime?’ — I think
   the good actors see that as a good thing,” she says.
   Created in 2011, DFS has been a regulator feared more than any of its
   counterparts in other states for the power it has over banks, insurance
   companies, and a host of other financial institutions. It brought
   ambitious money-laundering cases against banks like BNP Paribas (a
   settlement that resulted in several bankers losing their jobs), fined
   Deutsche Bank for its relationship with Jeffrey Epstein, and levied a
   $2.5 million fine on the National Rifle Association for selling its
   so-called murder insurance in the state. “DFS has a lot of teeth, and
   the sky’s the limit if the agency is exercised properly,” says state
   Sen. John Liu of Queens, a member of the state finance committee. “DFS
   compelled multinational banks to cough up $15 billion. We were able to
   build a couple bridges with that money. We still have much
   infrastructure in the state of New York that might benefit from DFS’s
   vigorous functions.”
   But part of DFS’s mandate is to keep the state’s economy healthy, a
   balancing act when it means protecting consumers from predatory, but
   also lucrative, companies. “For me, it’s an opportunity to bring my
   lived experience as a woman of color,” Harris says. So far, she has
   established the agency’s first climate division, frozen fees for
   check-cashing businesses that target the poor, and looked into non-bank
   lenders for evidence of redlining. “It’s important to me that those
   voices are at the table and being heard,” she says. “I bring a sort of
   pragmatism. It’s one thing to sit in our offices with nice views and
   make policy, but it’s another thing, in my mind, to really run the
   water through the pipes.”
   In 2008, Harris joined Sullivan & Cromwell, a law firm so close with
   Goldman Sachs that it has long sent its lawyers to work in-house at the
   investment bank. It was there that she worked for H. Rodgin “Rodge”
   Cohen, then the law firm’s chairman and the so-called trauma surgeon of
   Wall Street. Cohen remembers Harris working late into the night writing
   near-flawless memorandums so they’d be ready on his desk in the
   morning. “She just brought what I’d call a penetrating intelligence to
   the problems that were at hand,” Cohen tells me. “Many of the problems
   we get, you cannot just look up the answer in a book. It’s a question
   of judgment and trying to apply rules written often for other
   circumstances.” Still, it was clear that corporate law wasn’t for her.
   “Her heart was really in public service,” he says. From there, she went
   on to work for the Treasury Department, then the Obama White House,
   where she focused on policies around the then-upstart fintech industry.
   After the administration turned over, Harris took a spin through the
   revolving door between government and business. Her New York
   financial-disclosure forms show a superabundance of work with the tech
   and finance industries: She sat on the boards of six companies and
   nonprofits, including LendingClub, which had recently settled with the
   Federal Trade Commission over claims it had misled users on fees. She
   also advised 11 companies, owned two, and invested in or on behalf of
   two others. “I just thought, well, if you’re going to make policy about
   it, you should do the thing — run the company, build the company,” she
   says. “At the time, I felt very comfortable going to a start-up because
   I thought, well, coming out of government, you’re not making a ton of
   money. And if this start-up blows up, I’ll probably be no worse off,
   financially speaking.”
   It seems Harris did well enough. One real-estate tech company at which
   she worked went public last summer, and Harris appears to have cashed
   out. Since the disclosures were for 2020, they didn’t include her stake
   in Forethought, a private A.I.-based customer-service company that
   announced in December that it had attracted such investors as Harris,
   Ashton Kutcher, and Gwenyth Paltrow. When I asked her about
   Forethought, Harris said her investment in the company predated her
   time at DFS, that all her investments are now in a blind trust, and
   that she would recuse herself from any dealings with companies she has
   conflicts with.
   So when Hochul appointed Harris to lead DFS, she was attacked by the
   left. Zephyr Teachout and Cynthia Nixon both criticized Harris as being
   insufficiently independent, thanks to her connections in tech and
   finance. The American Prospect dug up a speech in which she
   characterized regulators as looking for “no-nos” and “icky things.”
   Harris has also advised the cash-advance companies Earnin, Brigit, and
   SmartWage (based in South Africa), according to her disclosures. In
   2019, DFS led a multi-state investigation into the cash-advance
   industry over whether they created debt traps and state banking and
   anti-usury laws, since equivalent interest rates for the fees they
   charged would reach as high as 469 percent. A person directly familiar
   with the investigation told me that Harris’s predecessor was presented
   with multiple options for furthering the investigation, including
   reaching a settlement, but ultimately never made a decision. DFS
   wouldn’t comment.
   So, of all the companies to work for, why them? “My role, when I was
   working with those companies, was not to dictate price pricing or
   business model. It was more to say: Here’s how regulators would view
   this. Here’s why you should engage with them. Let me help you engage
   with them and figure out these issues and how you can also serve
   customers. Less pricing and business model, but, as an adviser who’s
   not in the day-to-day, helping to sort of guide a culture and
   mentality,” she says.
   Did she disagree with those arguing that these companies created debt
   traps for consumers?
   “I think it’s hard to paint with a broad brush,” she says. “I think we
   should always always be careful with any new products and services,
   that they are affordable and non-predatory, not creating debt traps,
   and that they’re solving a real problem for consumers. And I think some
   do that and some don’t.”
   Last summer, after Andrew Cuomo resigned as governor, many of his
   appointees went with him, including then-superintendent of DFS, Linda
   Lacewell. Soon Harris’s old boss, Cohen, had recommended her to Kathryn
   Wylde, the president and CEO of the Partnership for New York, a
   business-advocacy group that has advised DFS. “The folks at Sullivan &
   Cromwell thought that Adrienne would be a terrific candidate to field
   for that job given her eight years of experience in the Obama
   administration and the fact that she was somebody who understood
   industry,” Wylde says. “On the theory that a regulator should know
   something about the industries they’re regulating — which may be a
   novel concept but struck me as a valid one — I thought she sounded like
   a terrific candidate.” Harris sailed through her confirmation, with 63
   senators voting for her and nine against. “When the regulated are
   complaining that the regulator is being too aggressive, that generally
   means the regulator is doing their job.” said Michael Gianaris, the
   state senator from Queens who voted against Harris’s nomination and, in
   2019, tanked Amazon’s proposed HQ2 in New York. “Cuomo was a prick, and
   the people he appointed tended to share his bare-knuckles approach to
   the world. In some cases, that’s actually not a bad thing.”
   While the crypto industry doesn’t appear to be getting the reprieve it
   had been hoping for, other industries will surely lobby Harris to make
   similar gestures toward the business community. For instance, Wylde
   says that insurance companies are hoping that Harris will lower the
   reserves they are required to have on hold, which they claim are higher
   than what’s required by other states. “There are some long-standing
   issues that the industry has that they feel that they’ve got a fresh
   start on with Adrienne’s leadership,” she says.
   Still, crypto is going to play a major part in how Harris’s tenure is
   defined. “It’s clear that New York is doing well now and the companies
   that came and started here five to ten years ago are doing well,” says
   Matt Homer, a former deputy superintendent at DFS and the current
   executive-in-residence at the venture-capital fund NYCA Partners. “It’s
   not totally clear what the future will look like five to ten years from
   now.” New York is the home base for major exchanges such as Coinbase
   and Gemini, and it’s also home to shady NFT front-running scandals and
   alleged rapping billionaire money launderers. That such a volatile
   industry could implode and damage New York’s economy is apparent. “I
   understand that other states may have gone the opposite way of the
   BitLicense, but there are things we can do here in New York that will
   hopefully inform the federal regulators as they continue to think about
   this space,” Harris said. “It’s a new world with crypto, with DeFi,
   with NFTs.”

References

   1. https://nymag.com/intelligencer/2022/03/adrienne-harris-is-cryptos-most-powerful-regulator.html#:~:text=birth of cryptocurrency-,,,-it was supposed