The Office of the Comptroller of the Currency (OCC) is considering ways it can collect more data from banks that engage in cryptocurrency activities, Acting Comptroller Michael Hsu said Tuesday.
Speaking at DC Fintech Week, Hsu said more information regarding banks’ crypto-related activities is needed to understand the scope of crypto-asset exposure among the banks the OCC supervises.
OCC-regulated banks are already required to seek a supervisory non-objection with the regulator before engaging in any crypto activity, Hsu said.
While the approach has been effective in monitoring banks’ crypto-related activities, Hsu said further enhancements may be needed “to track the risk of cross-contagion.”
“A structured and recurring gathering of quantitative data focused on the nexus between banks and crypto could help ensure that regulators have an accurate and complete view of the risk,” he said.
Hsu said he also supports the idea of gathering such data from the crypto firms directly in an effort to provide financial stability regulators with a “fuller picture of what’s going on, thus enabling more effective surveillance of financial stability risks.”
Acknowledging that such a task would fall outside the scope of the OCC, Hsu said the Office of Financial Research could monitor the activity.
“Given the borderless nature of crypto, international coordination on this front could also be warranted and helpful to consider,” he said.
Hsu’s remarks highlight the OCC’s cautious approach to crypto under his leadership, and follow a June 2021 announcement that the regulator would revisit all digital asset-related guidance put forth under former Acting Comptroller Brian Brooks.
“Everything’s on the table,” Hsu said of the regulator’s past actions regarding cryptocurrency activities and crypto firm charters.
Under Brooks, the OCC took a crypto-forward approach, issuing guidance regarding banks’ use of stablecoins and blockchains, as well as an interpretive letter clarifying that national banks are allowed to provide cryptocurrency custody services.
In response to outreach on President Joe Biden’s digital assets executive order, Hsu said crypto exchange FTX submitted a presentation to the Financial Stability Oversight Council (FSOC) arguing the integration of crypto and traditional finance would enhance financial stability.
“I could not disagree more,” Hsu said.
The crypto sector, with all its promise, is still in its infancy, and proper monitoring is needed to safeguard the consumers and financial institutions that engage in it, Hsu said.
“[T]hat promise cannot mask the lack of clarity on basic things like ownership, the ever-changing landscape of consensus mechanisms and technology, and the unabating volume of scams, hacks, and fraud,” he said. “Integrating an immature crypto industry with a mature [traditional financial] system without guardrails and gates would be imprudent.”