The New York Division of Financial Services (NY DFS) plans to focus on equitable access to banking and on fostering innovation in consumer financial services. That's according to Adrienne A. Harris, the current superintendent of NY DFS, who spoke the recently at Fintech Nexus in New York City.
This could have big implications for lenders who seek to broaden their customer base or integrate virtual currency into their businesses.
The influential regulator is the preeminent regulator of virtual currency, and has an extreme breadth of regulation in New York. The agency has often been among the first state agencies to regulate digital banking and virtual currencies. Other state agencies tend to take their cues from the NY DFS, which is why it is so important for companies in financial servies to monitor the agency.
The agency “strive[s] to be a forward-looking, innovative regulator,” Harris said, emphasizing that the agency is focused on policy, process, and people, and that they aim to continue to keep New York “at the center of technological innovation.”
The agency is currently working to triple the size of its staff. According to Harris, this is in order to lead through “greater engagement and new policy.”
Here, according to Harris, is where the NY DFS will be focused:
Equitable Access to Banking
In early May, New York Governor Kathy Hochul signed legislation authorizing a study on underbanked communities, as well as legislation prohibiting banking organizations from issuing unsolicited mail-loan checks. Harris noted that increased equity is critical in banking and credit, and that the agency will be focused on ensuring New York is boosting consumer protections and bringing much-needed resources to consumers, as well.
Fostering a Positive Environment for Innovation
Harris recognizes that the regulatory approach to regulating innovation must be balanced, saying businesses and regulators “can’t approach either regulator or innovation as all good or all bad.” Harris explained that the NY DFS is funded by assessments, and because of that, they hope to provide a service to the industry, encouraging regulated entities to work “hand in hand” with their agency in order to create a better environment for consumers.
Collaborating with the Federal Regulators
Harris noted that federal regulators often turn to NY DFS, especially on the subject of virtual currencies. “There is a concern about a race to the bottom,” Harris explains. The federal regulators are concerned that states who do not implement regulations for virtual currencies and digital banking will attract more business than those that do, making consumers vulnerable to inconsistent or lax regulation. However, Harris said that we haven’t quite seen those fears come to fruition, since New York has some of the most rigorous regulation of virtual currencies, and about 46% of venture capital investments in 2021 in cryptocurrency was in New York.
As virtual currencies and digital banking become more prevalent, and as consumer protection becomes a central focus (particularly if we enter a recession) it will be critical for companies in financial services to pay attention to what is going on in New York.