Michael J. Hsu said that the mainstreaming of crypto has occurred despite regulatory and legal uncertainty, and a series of scams, hacks, and other disruptive events.
The Acting Comptroller of the Currency, Michael J. Hsu, highlighted the need for collaboration and coordination with large crypto intermediaries to better understand the risks within the growing $2 trillion cryptocurrency market.
Speaking at the Transatlantic Finance Forum on the topic of “The Future of Crypto-Assets and Regulation”, Hsu pointed out the various venues — crypto exchanges, nonfungible tokens (NFT) and metaverse — where anyone with an internet connection can invest, adding:
“The mainstreaming of crypto has occurred despite regulatory and legal uncertainty, and a series of scams, hacks, and other disruptive events. For financial regulators like me, this presents a host of questions. Where should regulatory attention be focused? What should be done? By whom? And why?”
According to Hsu, the Office of the Comptroller of the Currency (OCC) reminded banks to demonstrate capability before getting federal permission to engage in crypto activities.
The acting Comptroller also highlighted the rising risks in crypto as the holders of USD-backed stablecoins trust that they can redeem their stablecoins for US dollars on demand, at par, with no questions asked:
“What if, however, that trust were to waver or be lost? Stablecoin holders, knowing that the first to redeem would have the highest chance of getting their money back, would rationally redeem immediately.”
Hsu calls for collaboration with crypto intermediaries to minimize the consequences of a loss of trust in crypto. “While banks and trust companies have a long and successful history of custodying and safeguarding assets, the technology underlying crypto and the associated governance with certain tokens present a host of novel issues warranting careful analysis and consideration,” he concluded.
At his confirmation hearing last week, Federal Reserve chair Jerome Powell confirmed that the agency will release a new report on digital currencies despite not being “quite where we needed to get it.”
New digital currency legislation coming soon👀
— Tom Emmer (@RepTomEmmer) January 11, 2022
Powell highlighted ongoing changes in monetary policy, which is expected to address policy surrounding the possible rollout of a central bank digital currency in the United States:
“The report really is ready to go and I would expect we will drop it — I hate to say it again — in coming weeks.”