Acting Comptroller of the Currency Michael Hsu wants to redefine the bank regulatory perimeter to determine how best to oversee crypto firms.
In comments to the Federal Reserve Bank of Philadelphia this week, Hsu advocated for consolidated supervision — the idea of an agency or group of agencies empowered to oversee a firm and all of its subsidiaries, including branches that might not fall under traditional lines of supervision. He compared the failed oversight of AIG subsidiaries which led to the firm’s large-scale collapse in the 2008 financial crisis with what could happen should regulators fail to take a multi-pronged approach to crypto regulation.
Hsu said historically, a failure leads to the widening of the banking perimeter to include at-risk firms undertaking banking-like activities. He’s advocating regulators widen that perimeter now, since crypto firms are already undertaking some activities that resemble banking services.
“Alternatively, 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 in his remarks.
Hsu has made similar comments in the past, including warning AIG-like consequences should regulators fail to take a holistic look at crypto regulation. For that reason, he reiterated his call for inter-agency cooperation.
“There needs to be less regulatory competition and more cooperation, less parochialism and more teamwork, less go-it-alone independence and more interdependence,” he said.
As head bank regulator, he said the Office of the Comptroller of the Currency “stands ready to lead the way” in this collaboration. And so far it has, having recently completed a cooperative sprint with the Federal Reserve and Federal Deposit Insurance Corporation to work on the crypto problem. Those results have yet to be communicated, but Hsu said in today’s remarks that releases detailing findings are forthcoming.
“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,” he said. “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.”
Hsu’s time as OCC head may be coming to an end as the nomination process for President Biden’s pick for the agency, Saule Omarova, moves forward. A vote has yet to be set, but many Republican representatives have expressed their opposition to Omarova, who they’ve called “anti-bank.”