The New York State Department of Financial Services has created a new division to supervise crypto businesses operating in the state. Called the Research and Innovation Division, the new department would be responsible for supervising all emerging technologies in finance. This includes licensing and supervision of all activities related to cryptocurrencies. New York’s existing BitLicense regulatory regime would come under the new division.
A Change in Tune
The previous superintendent Maria T. Vullo was vehemently opposed to any experimentation for regulation for all non-banking financial companies. “Toddlers play in sandboxes. Adults play by the rules,” she said after the Treasury Department called for the creation of regulatory sandboxes to promote innovation in cryptocurrencies.
But her successor, Linda Lacewell, has struck a different tune. “The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow,” she stated. The press release also names four executives with extensive experience in Fintech who will lead the division and implement policies.
Leading the effort is Matthew Homer, an executive with experience working in a government agency and startups. Olivia Bumgardner will be the deputy superintendent of the division. During her tenure at the NYDFS, she was responsible for several cybersecurity and digital assets-related projects. Matthew Siegel, an attorney at the Department of Justice, and Andrew Lucas, director of the office of financial innovation, complete the team.
Crypto Regulation by the NYDFS
The NYDFS has had some form of crypto regulation in place since 2015, after creation of the BitLicense program. With its onerous and costly reporting requirements, however, the program has hampered innovation rather than encouraging it. Cryptocurrency entrepreneurs especially have been vociferous in their opposition to it and decamped to other states.
At the Coindesk Consensus conference last year, Shapeshift CEO Erik Vorhees said it was absurd that you could be two miles from the Statue of Liberty but were still not able to sell CryptoKitties without a license. (The conference was held in Midtown at a distance of more than two miles from the Statue of Liberty.) BitLicense’s architect and former NYDFS superintendent Ben Lawsky has since become a consultant to cryptocurrency startups looking to establish themselves in the state.
Since its establishment, 20 BitLicenses have been issued. The latest recipients of this license are two subsidiaries of Seed CX, a crypto exchange.