The New York State Department of Financial Services (NYDFS) is taking steps to defend its much-contested track record as an early regulator of cryptocurrency.
In remarks at this year’s Conference of State Bank Supervisors Tuesday, NYDFS superintendent Maria Vullo discussed the agency’s efforts to police the cryptocurrency space, touting the state’s technology-specific licensing regime, the BitLicense, as an example of how her agency has contributed to the maturation of the industry.
Because the agency’s role is to protect consumers, cryptocurrencies needed to be regulated, and these regulations, she argued, have benefited the space.
She told attendees:
“The regulatory structure that we created for virtual currency has helped our licensed companies attract greater interest from customers, investors, and potential financial services partners seeking to pursue further innovation, while protecting market integrity by stringent standards applicable to all law-abiding business enterprises.”
Vullo said her agency held public hearings in early 2014, before she took over the top job, as “the problems at Mt. Gox – then handling 70 percent of Bitcoin exchanges – continued to spiral out of control.” The regulator drafted rules governing virtual currency businesses and finalized the BitLicense in 2015.
The regulation helped “insure that the competition among new entrants is not a race to the bottom.” She again cited the example of Mt. Gox, where “fatal flaws” caused investors to lose hundreds of millions of dollars worth of bitcoin – now billions, due to the higher exchange rate.
Vullo emphasized the agency’s focus on consumer welfare and industry compliance, saying:
“DFS and the states have helped set the standards through our application and examination processes to ensure that customer protection is taken seriously, and cybersecurity and [anti-money laundering] standards are respected.”
Vullo did not address criticism of the BitLicense, which many in the industry see as imposing sweeping, onerous requirements. Only a handful of companies have obtained the license, and New York State assemblyman Ron Kim submitted a bill in February to replace the framework. The bill remains in committee.
Kim told CoinDesk last month that “one person, the superintendent from one state government agency, has way too much power over the current regulations, without any oversight.”
The Department of Financial Services did not immediately respond to a request for comment.
Manhattan image via Shutterstock.