The Monday morning after the third-largest bank failure in U.S. history, New York Gov. Kathy Hochul hosted a press briefing to talk down a nation on the edge. The bank, Signature, had a New York charter, but it wasn’t Hochul who decided to seize control of the collapsing institution and hand it over to the FDIC, capping the most turbulent financial weekend since 2008. After a brief introduction, Hochul ceded the stage to the woman who had choreographed the takeover: Adrienne Harris, superintendent of the New York Department of Financial Services.
With an understated assurance, Harris stood at the podium, describing how her team had worked with the federal government to avert disaster. “The banks are open and ready for business this morning,” she said with the hint of a smile.
The New York DFS is an unusually powerful regulator, not only because of its seat in the financial capital of the world, but also because of its broad portfolio that stretches from banking and insurance to student loan providers. In recent years, though, the department’s oversight of the roller-coaster crypto industry has put it under a spotlight and a magnifying glass, even more so than federal counterparts like the U.S. Securities and Exchange Commission.
Unlike its D.C. peers, DFS has an added objective: Explicit in the department’s mission is not just regulation but economic growth. For Harris, who arrived with an imposing résumé of governmental and corporate experience, the twin imperatives have meant sustaining the state’s nation-leading approach to nurturing the crypto industry while making sure the state doesn’t open its doors to the next Sam Bankman-Fried.
“That’s the key with any sort of new innovation, is how can you foster responsible, useful innovation and protect consumers and markets from bad actors,” Harris told Fortune over a video interview. “You have troubling times, and it’s not an easy thing to do as a policymaker, but that’s the job.”
“That’s the key with any sort of new innovation, is how can you foster responsible, useful innovation and protect consumers and markets from bad actors?”Adrienne Harris, DFS superintendent
The power of Harris and her DFS is rooted in the department’s groundbreaking approach to crypto regulation, which it established through its BitLicense virtual currency program in 2015. The BitLicense, devised by then-superintendent Benjamin Lawsky, established New York as the first state to create a regulatory framework around crypto—a pioneering move that, along with its willingness to grant trust charters, attracted top firms. A trust charter—a step higher than a BitLicense—grants firms fiduciary authority.
Andrew Chang, the former COO of the digital assets firm Paxos, says that his company decided to move from Singapore to New York because of Lawsky’s welcoming stance. In 2015, Paxos became the first company to receive a trust charter for digital assets. “It was crazy to think that, for his credit, he saw [crypto] was going to be a thing,” Chang says. “Let’s regulate it from the beginning.”
The dual offerings of BitLicenses and trust charters allowed crypto companies to conduct business in New York, from issuing stablecoins to holding virtual currencies like Bitcoin and Ether for customers. Meanwhile, federal regulators failed to establish any rules for the industry as Congress struggled to pass legislation—a vacuum that still exists. “When [DFS] says to come in and have a conversation, they’re actually doing that, as opposed to what we’re seeing at the federal level,” said Kara Calvert, the head of U.S. policy at Coinbase, an early BitLicense recipient.
Facing crypto’s wrath
Harris took over as superintendent in January 2022, becoming the first Black woman to lead the department. (She had been serving as acting superintendent since September 2021.) At the time, she was teaching as a professor at the University of Michigan’s public policy center, as well as serving as a senior advisor at the corporate advisory Brunswick Group.
She had spent the bulk of her career in public service, including stints in the Treasury Department and the Obama administration, where she managed the financial services portfolio and led an interagency task force on distributed ledger technology and crypto.
Still, as Harris began at DFS, progressives worried that she would be too deferential to corporate interests. Before stepping into government, Harris was also an associate at Sullivan & Cromwell, the law firm currently unraveling FTX’s bankruptcy. After she left the Obama administration, she dived into the corporate world. Financial disclosure forms from 2021 reviewed by Fortune reveal that Harris sat on the board of directors for 10 companies and nonprofits, including the controversial loan platform LendingClub and the real estate startup Homie. She was an advisor to 11 others, many of them in the financial technology space, including the payday loan app Brigit.
Michele Gilliam, the political director at the progressive nonprofit Action Center on Race and the Economy, challenged Hochul’s DFS nomination of Harris in a January 2022 op-ed for the New York Daily News, describing Harris as a “fintech booster” and citing her work with Brigit, LendingClub, and Homie. In an interview with Fortune, Gilliam said the past year has confirmed her fears about Harris, especially as the Hochul administration feuds with labor organizations. “It certainly hasn’t changed,” Gilliam said. “She’s still been very influenced by corporate lobbyists.” (Harris declined to comment.)
During Harris’s brief tenure at the helm, the DFS has been assertive in managing its broad portfolio, bringing enforcement actions against life insurance companies and issuing guidance on how banks should approach the risks posed by climate change. She has demonstrated a particularly measured approach to the crypto portfolio she inherited, even before the market’s precipitous collapse last year.
“When [DFS] says to come in and have a conversation, they’re actually doing that, as opposed to what we’re seeing at the federal level.”Kara Calvert, Coinbase head of U.S. policy
Among crypto industry insiders, there is constant criticism of DFS’s slow and laborious process of issuing BitLicenses. Thirty-three digital asset companies have a BitLicense or trust charter—FTX.US applied for a trust charter in May 2022 but was never approved—and only six companies have been granted a BitLicense since Harris was sworn in.
One New York–based crypto startup founder, who spoke on the condition of anonymity to not imperil their standing with DFS, told Fortune that they couldn’t wait around for three years for approval, burning runway capital on legal fees as department staff pored over its financial records and business plan for potential risks. Instead of applying in New York, they are exploring offshore options, including in the Cayman Islands.
Harris says her growing crypto team, bolstered by new virtual currency oversight funding granted by last year’s state budget, is evidence that the process is improving. When she arrived, she says, the crypto team was skeletal; now it has over 50 people. Even so, Harris cautions, “Speed is not the metric,” adding, “It doesn’t mean we shouldn’t be efficient.”
Her approach to crypto enforcement actions has been more aggressive, especially in the months following November’s implosion of FTX. With the fall of Bankman-Fried’s empire, all eyes turned to Binance, the stateless exchange with a reputation for rule-skirting. Although Binance did not have a BitLicense, it did have a foothold in New York through a partnership with Paxos, which issued a Binance-branded stablecoin called BUSD that had grown to a market cap of over $20 billion. After reports that Binance was using customer collateral associated with the stablecoin for its own purposes—a disquieting echo of FTX—the DFS acted, ordering Paxos to end its partnership with Binance and cease issuing the token. Changpeng Zhao, Binance’s cofounder and CEO, tweeted that given the “regulatory uncertainty in certain markets,” Binance would begin reviewing its other projects.
Many in the crypto industry criticized Harris’s heavy-handedness towards Paxos since it had previously earned DFS approval to issue BUSD. She defends the action: “We were taking responsible decisions with the stability of the market in mind.”
Stoking the economy
Still, the remit of the DFS is not just stability but driving growth. “If there’s going to be a crypto company X that exists, then you want to be the one to regulate it and have them in your state, because you have that economic development mandate,” says Matthew Homer, a former DFS deputy superintendent focused on digital assets. He added that BitLicenses and New York trust charters have grown even more valuable as Congress continues to drag its feet on crypto legislation.
For Harris, it has become increasingly difficult to balance the DFS’s priorities as crypto firms buckle and lash out. Her decision in mid-March to take over Signature was a flashpoint. The bank, which catered to entrepreneurs in crypto, real estate, and a variety of small businesses, was destabilized by a run of withdrawals by depositors. But many crypto leaders saw DFS’s action as an attack on their industry, with some voicing their intention to leave New York, despite Harris’s denials that the seizure was related to the bank’s crypto business.
“Regardless of what DFS’s intentions were, it was taken extremely negatively by the crypto community, and it will negatively impact trust in the DFS long-term,” Austin Campbell, the former chief risk officer at Paxos and an adjunct professor at Columbia Business School, told Fortuneat the time.
The move demonstrates Harris’s willingness to wade into contentious arenas, all while elevating her home state’s standing. In December, she was appointed the banking representative for all states on the powerful Financial Stability Oversight Council, a federal organization created by the landmark Dodd-Frank banking legislation that includes such illustrious figures as the Treasury secretary, the Federal Reserve chair, and the SEC chair. “We are at the table all the time,” she told Fortune.
“If you’re a crypto innovator and you want to be regulated—you want this halo that comes with being regulated—you don’t have a lot of options. New York is still the best option.”Matthew Homer, former DFS deputy superintendent focused on digital assets
Harris’s takeover of Signature was a display of New York’s financial might, thrusting the DFS into the center of the banking crisis and opening Harris to wider scrutiny. At press time, details continued to emerge about the perilous weekend that spurred her into action. Harris has defended the seizure even under fire from one of Dodd-Frank’s architects, former congressman turned Signature board member Barney Frank, who argued that the bank could have survived on its own.
Homer says that fielding such criticism is part of Harris’s job. In his view, New York’s status isn’t in jeopardy. He pointed to a recent BitLicense granted to the social investment platform eToro in February as evidence that New York is still spurring responsible innovation, as federal regulators continue to battle over jurisdiction.
“If you’re a crypto innovator and you want to be regulated—you want this halo that comes with being regulated—you don’t have a lot of options,” Homer said. “New York is still the best option.”
Editor’s note: This article was updated on April 5, 2023 to include more detail about Adrienne Harris’s tenure at DFS.
This article appears in the April/May 2023 issue of Fortune with the headline, “In focus: Adrienne Harris.”