The Acting Comptroller of the Currency, Michael J. Hsu, has cautioned banks over embracing cryptocurrencies. In a speech during the Fintech Conference at the Federal Reserve Bank of Philadelphia, he said the federal banking agencies recently had a “crypto sprint” and will shortly be making a formal announcement.
“The OCC will also provide clarity on the recently concluded review of crypto-related interpretive letters. The message from both is that the agencies are approaching crypto activities very carefully and with a high degree of caution. We expect banks to do the same,” said Hsu.
While Brian Brooks was Acting Comptroller, he issued three interpretive letters. These included enabling banks to custody digital assets, holding stablecoin reserves and participating in stablecoin networks. Before joining the OCC, Brooks worked at cryptocurrency exchange Coinbase, and had a brief stint afterward at Binance. He is now CEO of Bitcoin mining firm Bitfury.
Meanwhile, banking associations are frustrated that banks can’t be more involved with digital assets pointing to “same risk, same rules” when it comes to regulations.
Hsu continued, “To the extent the OCC’s prior communications have been interpreted as tacit encouragement to engage in crypto activities, the forthcoming releases will clarify that safety and soundness is paramount. The releases should not be interpreted as a green light or a solid red light, but rather as reflective of a disciplined, deliberative, and diligent approach to a novel and risky area. We will proceed carefully and cautiously and will hold banks to the same.”
The remainder of his speech discussed reviewing the banking regulatory perimeter. He observed that some fintechs and cryptocurrency companies participate in deposit taking, lending and payments, which are considered banking activities.
Hsu noted that regulatory perimeters in the past have only been changed following crises such as AIG’s losses in 2008. Instead, he encouraged regulators to take a proactive approach. “We could start now, by considering which crypto activities should be
separated; where the line for comprehensive, consolidated supervision should lie; and how such supervision can best be achieved,” he said.
No single regulatory agency can answer all the questions, but he said regulatory agencies need to evolve and interact differently. There needs to be “less regulatory competition and more cooperation”.
This month President Biden nominated Cornell law professor Saule Omarova to be comptroller of the currency.