New York State financial regulator Adrienne Harris argued that the “anonymity element” of cryptocurrencies creates an environment in which they can be used for illicit finance.
Speaking at a panel Financial Times Crypto Winter Summit Harris, who oversees the New York Department of Financial Services (NYDFS), said cryptocurrencies “are actually a conducive environment for illicit finance and malicious actors.”
“Someone still has to show up at the drop site,” Harris said, pointing out that paying the ransom in cash, for example, “is not the case with digital currency, even though there is an element of traceability.” ”
Harris added that the issue of the “illicit financial component of cryptocurrencies” has been on the minds of state and federal regulators for several years. “I think this will continue and I think there will be increased interest in this as a result of some of the cases brought by Binance and the DOJ and other authorities around the world,” she said.
“Socialization” of cryptocurrency companies
Harris said one challenge facing NYDFS is “socializing” cryptocurrency companies into the regulatory environment.
“For us, it was really a mission to socialize companies,” she said, adding that traditional financial services companies such as banks, insurance companies or mortgage lenders “are used to having regulators and know what those interactions are like.” said. .”
Harris said NYDFS needs a “tone reset,” laying out rules and expectations for cryptocurrency companies and taking enforcement action when necessary. She cited the regulator’s $100 million lawsuit against Coinbase and the $30 million lawsuit against Robinhood as examples.
She notes that in her experience with New York regulators, “what we typically see is that businesses expand much faster than the compliance agencies,” and that in most cases where companies fail to comply, “they are almost exclusively involved in illicit financial and It’s about a cybersecurity breach.”
Harris also argued that cryptocurrency companies “need to make sure they’re adequately resourced for compliance,” adding that while there’s a lot of talk about technology to help with strong KYC, “when we vet companies, we don’t have a lot of paper in the office.” “I’m always surprised.” “If you want to be part of this ecosystem, you have to be a mature financial services company,” she said.