OCC acting head compares crypto-asset intermediaries to corrupt bank

The Financial Stability Board (FSB) Crypto Working Group met on Feb. 22. United States Acting Comptroller of the Currency Michael Hsu gave opening remarks at the meeting and shared thoughts on cooperation and collaboration in global supervisory activities.

Hsu devoted much of his short talk to the Bank of Credit and Commerce International (BCCI), an international bank that closed in 1991 after a seven-country operation against its money laundering and other financial crimes. Before its closure, BCCI had offices in over 72 countries. Hsu said:

“The BCCI story has parallels to FTX and other failed crypto-asset intermediaries.”

Like BCCI, FTX had no single supervisor and its parent holding company was not subject to regulation in the jurisdiction where it was chartered. The collapse of BCCI led to enhanced supervision of international banks, Hsu said. In the United States, the Foreign Bank Supervision Enhancement Act (FBSEA) was one of the resulting enhancements.

The FBSEA gave U.S. banking supervisors access to information about foreign banks and led to similar legislation worldwide. The FSB has a comprehensive regulatory framework for crypto asset activities, but it has seen little success. “The crypto industry continues to resist what it sees as improper or over-burdensome regulation and oversight, while jurisdictions continue to compete for crypto business,” Hsu said.

Hsu emphasized the FSB principle of “same activity, same risk, same regulatory outcome” and noted that competition among jurisdictions gives crypto firms leverage. He added:

“Even though the underlying blockchain technology is supposedly trust-resistant, nearly all crypto activities operate through intermediaries, whom users must trust.”

These are common themes for Hsu, who observed a year ago that “currently, no crypto platforms are subject to consolidated supervision. Not one.”

In closing, Hsu spoke about tokenization. The Office of the Comptroller of the Currency hosted a symposium on tokenizing real-world assets and liabilities earlier in the month. The keynote speaker, a representative of the Bank for International Settlements, emphasized the practicality of tokenization without blockchain. Hsu urged a close look at the “financial stability profiles of different scenarios” for tokenized real-world assets.

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