New York Regulator Highlights Crypto’s Potential for Illicit Finance
The Superintendent of the New York Department of Financial Services (NYDFS), Adrienne Harris, spoke on a panel at the Financial Times Crypto Winter Summit and emphasized that cryptocurrencies have the potential to be used in illicit finance due to their “element of anonymity.” Harris argued that digital currencies create an environment where bad actors can engage in illegal activities without having to physically show up at a drop site, despite the traceability of transactions.
Harris acknowledged that state and federal regulators have been concerned about the illicit finance component of cryptocurrencies for years, and recent cases involving Binance and other authorities have increased attention on the issue.
“Socializing” Crypto Firms to Regulatory Environment
Harris highlighted one of the challenges faced by NYDFS, which is “socializing” crypto firms to operate within the regulatory framework. She explained that traditional financial services companies are accustomed to interacting with regulators and understanding their expectations, but this has required a “tone reset” for crypto firms.
NYDFS has set out rules and expectations for crypto firms and takes enforcement actions when necessary. Harris mentioned the regulator’s $100 million case against Coinbase and its $30 million case against Robinhood as examples. She emphasized that compliance with regulations is crucial, particularly in areas such as illicit finance and cybersecurity.
Harris also stressed the importance of crypto firms allocating resources appropriately for compliance and becoming mature financial services companies to be part of the ecosystem.
Hot Take: Anonymity in Crypto Raises Concerns About Illicit Finance
New York state financial regulator Adrienne Harris has expressed concerns about the potential for illicit finance in the cryptocurrency industry. Speaking at a summit, Harris highlighted how cryptocurrencies’ element of anonymity creates an environment conducive to bad actors engaging in illegal activities. She compared ransom payments made in cash, which require physical presence, to digital currency transactions that can be conducted without direct contact.
Harris acknowledged that regulators have been focused on the illicit finance aspect of cryptocurrencies for years, and recent cases involving Binance and other authorities have intensified scrutiny. To address regulatory challenges, NYDFS is working on “socializing” crypto firms to comply with regulations and enforcing rules when necessary. Compliance with regulations related to illicit finance and cybersecurity is crucial for crypto firms to establish themselves as mature financial services companies.
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