The chief of New York’s financial regulatory body said Tuesday that the agency is “fiercely opposed” to the U.S. Treasury Department’s recent endorsement of regulatory “sandboxes” for fintech firms
In a statement published on the the Department of Financial Services (DFS) website, Superintendent Maria T. Vullo said:
“The idea that innovation will flourish only by allowing companies to evade laws that protect consumers, and which also safeguard markets and mitigate risk for the financial services industry, is preposterous.”
The strongly worded comments come after the Treasury Department released a report Tuesday describing how non-banking entities, including fintech firms and data aggregators, should be regulated, recommending the creation of regulatory sandboxes “to promote innovation.”
In her response, Vullo wryly added: “Toddlers play in sandboxes. Adults play by the rules.”
The New York regulator then hit out at a Tuesday announcement by the Office of the Comptroller of the Currency (OCC) that it will begin to accept applications for “national bank charters from nondepository financial technology companies engaged in the business of banking.”
The decision “helps provide more choices to consumers and businesses, and creates greater opportunity for companies that want to provide banking services in America,” said Joseph M. Otting, Comptroller of the Currency.
Vullo said the DFS is “also strongly opposed” to the OCC decision. Such a move, she said, is “clearly not authorized under the National Bank Act,” and would “impose an entirely unjustified federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape.”
When asked if the charter applications could include those from cryptocurrency and blockchain startups, Bryan Hubbard, OCC public affairs officer, told CoinDesk in an email:
“Rather than focus on a particular technology, the eligibility for applying for a special purpose national bank charter is predicated on the company (or proposed company) engaging in at least one of the three core businesses of banking – taking deposits, paying checks, or lending money. To the extent that a company performs one of these activities, they would be eligible to apply.”
The decision was made after almost 2-years of deliberation that included two public comment periods and conversations with hundreds of stakeholders, he noted.
The New York DFS is notably the body that governs cryptocurrency firms in the state and somewhat controversially developed the “BitLicense” framework for approving and registering crypto startups.
The agency has been criticized for setting a perhaps too-high bar for exchanges to operate in the state and to date only five companies have been issued a BitLicense, with the latest being Genesis Global Trading in May 2018.
The other four firms to be licensed in New York are Circle, in 2015; XRP II, a Ripple subsidiary, in 2016; and Coinbase and bitFlyer in 2017.