New OCC Chief Signals Greater Caution on Crypto

"We created an Office of Innovation, updated the framework for chartering national banks and trust companies, and interpreted crypto custody services as part of the business of banking. I have asked staff to review these actions," Acting Comptroller Michael Hsu said.

AccessTimeIconMay 18, 2021 at 8:01 p.m. UTC
Updated Sep 14, 2021 at 12:57 p.m. UTC
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The U.S. Office of the Comptroller of the Currency (OCC) will review its crypto-related guidance issued over the past year, its new chief said.

Michael Hsu, the new acting comptroller, said in prepared remarks that he requested a review of all of the federal bank regulator's pending matters, interpretative letters and guidance, including issues around digital assets and cryptocurrencies.

Much of the OCC's crypto guidance was issued under the administration of former Acting Comptroller Brian Brooks, and marked what seemed like a watershed moment for the crypto industry's acceptance from the broader banking sector. Brooks now leads Binance.US.

"At the OCC, the focus has been on encouraging responsible innovation," Hsu said. "For instance, we created an Office of Innovation, updated the framework for chartering national banks and trust companies, and interpreted crypto custody services as part of the business of banking. I have asked staff to review these actions."

Hsu said that he intends to keep an open mind but is "committed" to ensuring banks remain safe for consumers.

"My broader concern is that these initiatives were not done in full coordination with all stakeholders. Nor do they appear to have been part of a broader strategy related to the regulatory perimeter. I believe addressing both of these tasks should be a priority," Hsu said.

Hsu will testify before the House Financial Services Committee on Wednesday in a hearing that will include all of the U.S.' federal bank regulators.

OCC's crypto rethink

The hearing memo also discusses digital assets and the OCC's crypto-related actions under Brooks' leadership.

It states:

"Technology is rapidly affecting the financial system, with online lenders, payment processors, and other fintech companies increasingly growing in market share. Consequently, many of these companies desire a national charter that eases the state-by-state burden and allows them to perform bank-like activities, with the OCC and the FDIC in particular allowing firms to engage in banking activities while being subject to less regulations and supervision."

Still, while Hsu sounded cautious about some of these actions, he noted that fintech firms are not going away.

"I will expect any fintechs that the OCC charters to address the financial needs of consumers and businesses in a fair and equitable manner and support the important goal of promoting the availability of credit," he said. "Recognizing the OCC’s unique authority to grant charters, we must find a way to consider how fintechs and payments platforms fit into the banking system, and we must do it in coordination with the FDIC, Federal Reserve and the states."

This year, the OCC has granted three crypto-related firms trust charters: Anchorage, Protego and Paxos. While Brooks was still at the regulatory agency when Anchorage received its trust charter, the other two were granted after his departure.

In a statement, Kristin Smith, executive director of the industry lobbyist Blockchain Association, said:

"It's not surprising that a newly appointed Acting Comptroller would review recent policy decisions upon showing up to the job. We are encouraged by Acting Comptroller Hsu's nod to the importance of financial innovation, and we hope to be a resource to him in his new position."

Hsu's remarks come a day after the OCC announced that Chief Counsel Jonathan Gould, who signed many of these interpretative letters, would be departing the regulatory agency.

UPDATE (May 18, 20:25 UTC): Updated with additional context.

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