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OCC's Hsu Warns Against Commingling Banks and Crypto

Authored By: Lewis Wood on 10/11/2022

Source: American Banker

Acting Comptroller of the Currency Michael Hsu warned against crypto firms integrating with the traditional financial system, saying that crypto companies often "disguise" their products as being similar to banking ones.

To that end, he promoted a cautious view of regulating digital assets, and said that bringing crypto into the regulatory perimeter would only help tame crypto's risks depending "on whose terms it is brought in." 

"Using the familiar to introduce something novel can downplay or mask the risks involved and establish false expectations," Hsu said. "In time, people get hurt."

While the Office of the Comptroller of the Currency's authority is limited to banks' interactions with crypto on the digital assets regulation front, that still leaves the agency with several important sets of guidance and rulemakings that could have a big impact on crypto firms' ability to scale in the United States. The agency is currently under pressure on several fronts to reconsider Trump-era guidance that allowed banks to explore crypto-related banking activity. 

Hsu, speaking at DC Fintech Week Tuesday, described some behind-the-scenes interactions between crypto companies and banking regulators. He said that in July, a representative from FTX submitted a proposal to the Financial Stability Oversight Council and argued that integrating crypto and the traditional banking sector would enhance financial stability, Hsu said. 

"I could not disagree more," Hsu said. "Crypto today is an immature industry based on an immature technology." 

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