Adrienne Harris, the superintendent at the New York Department of Financial Services (NYDFS), announced updates to the department’s guidance should a crypto company become insolvent, following the announcement that she will step down from the role.
In a Tuesday notice, Harris said the NYDFS had updated guidance initially announced in January 2023 to better protect users “in the event of an insolvency or similar proceeding.” According to the guidance, the financial regulator focused on clarifying what were “acceptable sub-custodians,” guardrails for crypto custody, and “permissible uses of customer assets.”
“As we see the use of more sub-custodial relationships in the digital asset space, this guidance provides additional clarity on how those relationships should be governed,” said Harris.
Harris announced the updates less than 24 hours after New York Governor Kathy Hochul said the NYDFS superintendent would step down on Oct. 18, having served at the department for about four years. Kaitlin Asrow, an executive deputy superintendent, will replace Harris as acting superintendent, presumably until a permanent head can be found.
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Guidance for crypto users
Among the NYDFS’ updates to the 2023 guidance were that custodians were required to keep users’ crypto in “separate onchain wallets” or “one or more omnibus onchain wallets” with internal ledger accounts.
It added that custodians should not use customers’ crypto as their own, e.g., to secure credit.
As New York’s financial regulator, the NYDFS is responsible for overseeing crypto companies operating in the state or offering products or services to residents. The department launched its BitLicense program in 2015, which is required for any digital asset business in the state.
Change in New York leadership
In addition to Harris’ impending departure, New York City Mayor Eric Adams announced on Sunday that he would not be seeking reelection in 2025.
Adams, who was elected in 2021 after campaigning on receiving his first three paychecks in Bitcoin (BTC), has been outspoken on policies favoring the crypto industry. He has criticized the BitLicense program, proposed that New York adopt BTC-backed municipal bonds, and hosted a crypto summit in May at the city’s mayoral residence.
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