The head of the New York Financial Regulatory Department said Tuesday that the agency is "fiercely opposed" to the recent recognition by the US Treasury Department of regulatory "sandboxes" for fintech companies
a statement published in the Department of Financial Services (DFS), superintendent Maria T. Vullo said:
"The idea that innovation can only flourish by allowing companies to circumvent laws that protect consumers and that they also safeguard the markets and mitigate the risks for the financial services industry, it is absurd. "
The strongly worded comments come after the Treasury Department published a report Tuesday describing how the entities do not banking, including Fintech companies and data aggregators, should be regulated, recommending the creation of regulatory sandboxes "to promote innovation".
In his answer, Vullo ironically added: "Children play in sandboxes, adults play according to the rules."
The governor of New York then hit a Tuesday announcement by the Office of the Currency Controller (OCC), which will begin to accept requests for "domestic bank cards from non-banking financial technology companies engaged in the banking sector" .
The decision "helps provide more choices to consumers and businesses and creates more opportunities for companies wanting to provide banking services in America," said Joseph M. Otting, Comptroller of the Currency.
Vullo said that DFS is "strongly opposed" to the OCC decision. Such a move, he said, is "clearly not authorized by the National Bank Act" and "would impose a completely unjustified federal regulatory regime on a fully functioning and deeply rooted state regulatory landscape."
When asked whether the card applications could include those of cryptocurrency and startup blockchain, Bryan Hubbard, OCC's public affairs officer, told CoinDesk in an email:
"Rather than focusing on one particular technology, the admissibility to present a national bank card is based on the company (or the proposed company) that engages in at least one of the three main activities of the banking sector: take deposits, pay checks or lend money, to the extent a company conducts one of these activities, it would be eligible to apply. "
The decision was made after nearly two years of deliberation that included two periods of public commentary and conversations with hundreds of stakeholders, he noted.
The New York DFS is in particular the authority that governs cryptocurrency companies in the state and in some ways controversial has developed the "BitLicense" framework for the approval and registration of crypto startups.
The agency was criticized for setting a bar too high for trade to operate in the state and to date only five companies have issued a BitLicense, of which the latest is Genesis Global Trading in May 2018 .
The other four licensed companies in New York are Circle, in 2015; XRP II, a subsidiary of Ripple, in 2016; and Coinbase and bitFlyer in 2017.
New York image via Shutterstock