Adrienne Harris, New York Department of Financial Services Superintendent, joins 'Squawk Box' to discuss the importance of passing crypto legislation on the federal level, details of the GENIUS Act, and more.

New York

Adrienne Harris, superintendent of the New York Department of Financial Services, emphasized the importance of establishing a national regulatory framework for cryptocurrencies in the United States. She noted that, outside of New York, there are currently few clear rules governing crypto assets and stablecoins, and a federal approach would provide consistency, support innovation, and help maintain the dollar's status as the global reserve currency.

Harris discussed the GENIUS Act, which draws on New York's stablecoin guidelines, including requirements for one-to-one reserving and timely redemption. She highlighted a significant concern with the bill: a provision allowing foreign issuers to operate unregulated in the U.S. for three years, which could disadvantage domestic companies. Harris also pointed out that while stablecoins promise to make financial transactions faster and cheaper, the industry is still in its early stages and faces considerable risks.

NYDFS Superintendent: We need a national framework to govern crypto

This morning, crypto legislation clearing a hurdle in the House after a nine hour vote to establish the rules of debate, though, on the bills finally passed. Now joining us to talk about the potential regulatory framework for crypto and what it all means is New York Department of Financial Services Superintendent Adrian Harris. Back in 2022, Harris passed stablecoin guidelines here in New York. Oh, we we've made a lot of this. And I guess the biggest question is just how important is this bill ultimately? And if this all happens, what happens? I don't think people really actually even understand. Well, right now in the United States, there aren't really any rules of the road for crypto or stablecoin outside of New York and what we've done at at DFS in the past four years. So it's really important that we have a national framework to govern this technology, especially when it comes to the supremacy of the dollar as the reserve currency. So putting this in place is going to be good for innovation, good for markets. But but just just drill down, because I think people talk about genius act all the time and they don't even know what they're talking about here. I mean, we have conversations on the set recently about tokenization. People are tokenizing private private company stock, for example. I don't think this bill addresses whether that's legal or not, technically. No. So I think it's really important to distinguish crypto assets, tokenization of real world assets and stablecoin, which is what genius addresses. Right. So genius really takes from what we did in New York three years ago to put in place guidelines. There will have to be rules written, but things like one to one reserving. So to make sure there's a dollar for every stablecoin that a stablecoin issuer issues. Right. So it's back one to one with cash or cash equivalents that a consumer can redeem that stablecoin within a timely timeline. So are you of the view. So right now, Circle is the winner of the game. Yep. They're the only game. Really. Do you see over time there being multiple circles as a result of all of this or does this is a winner take all proposition? I think that's a really important question. I do think the regulatory framework coming into place nationally makes it easier for people to come in because there are clearer rules about what's going to be expected. But Circle, for instance, is one of our regulated entities. So they are already subject here in New York to the one to one reserving T plus two redemption, the public attestations of reserves. So all of that is stuff that Circle complies with. Others will now have to comply with it. I don't know if you can say this or not, but would you short, for example, all of the credit card companies, anybody who owns one of these networks, anybody who's engaged in financial transactions of any sort, given the idea that if stablecoins were to work the way they're supposed to work, you would think the margin compression on all of these fees would go to zero. You want Adrian to short all the credit cards coming to the superintendent of the Department of Financial Services. Well, you don't mean her. Actually, you mean if you were a person who were a person trying to understand where this all goes directionally, if this works the way it's supposed to work, you would think that it would take out a lot of margin. And then the question, who is going to capture that margin? So that is the promise of stablecoin, right, is that it is redoing the financial infrastructure so things can move more quickly. They can move more cheaply, faster, right, across borders and all of that. So I will stay away from giving investment advice or doing anything myself. I don't do that. But that is the espoused promise, is that this is going to remake the financial infrastructure in a way that's digitized. You can have smart contracts, right, so everything becomes more efficient. Do you believe that's the case? I think there's a lot of hope for that, but there's a long way to go. I think one of your guests earlier this week was talking about we're in the first inning when it comes to digital assets, right? You were watching? Of course I was watching. What is the biggest risk of all of this? What's the thing you worry about and you say to yourself, if the bill gets passed and all the things happen, this other bad thing could happen? Well, so one of the things in the bill in Genius is they allow for foreign issuers to issue into the U.S. unregulated for three years. I think that's a really big risk here. It essentially puts U.S. companies that are coming through the front door at a disadvantage. And I was watching earlier this week when Bob Diamond said, look, the mature companies want to be regulated, right? By giving this three-year exemption for foreign issuers, yes, it's a really big loophole in Genius. Part of it is just there's time for before between enactment and when the act becomes effective. That's 18 months. And then they've built in another 18 months. But why would we give overseas entities a break that you don't have to meet the same standards that you do if you're doing it from the United States? It's an important question. I mean, it's something I think a lot of regulators and others have been highlighting as a real important defect in the bill. That's a good question.

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