US Watchdog Says Banks Shying Away From Stumbling Crypto Industry

The OCC chief says lenders seem to be backing away from the industry’s recent dramas, and a new report from his regulatory agency criticizes the sector for "weak," risky practices.

AccessTimeIconDec 8, 2022 at 6:00 p.m. UTC
Updated Dec 8, 2022 at 6:17 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

U.S. banks have been cooling in their crypto interest since this year’s twin failing of Terra (and its currency, LUNA) and FTX, said Michael Hsu, the acting chief of the Office of the Comptroller of the Currency (OCC).

“Overall, I can say – and this is going to be obvious – is that there was more interest before Terra/LUNA and FTX than since Terra/LUNA and FTX,” said Hsu, whose banking agency released its "Semiannual Risk Perspective" report Thursday, in which cryptocurrency risks were given heightened prominence.

The report included a new section on digital assets as a “special topic in emerging risk,” and it pummeled the industry, saying its risk management practices “lack maturity.”

“Most crypto market participants appear unprepared for the stresses and surprises that have taken place this year, resulting in substantial losses for millions of consumers,” noted the report, which is issued twice a year to flag risks to banking in the U.S.

According to OCC guidance, national banks overseen by the agency – representing the vast bulk of significant U.S. lenders – aren’t allowed to dive into new crypto business without getting an OK from the agency that they’re doing it in a safe way. So far, most crypto activity at banks has centered on holding digital assets for customers, though some Wall Street firms have experimented with stablecoins and other uses for blockchain technology.

This year’s events – culminating recently with the implosion of one of the global crypto giants, FTX – “have revealed that the crypto industry risk management practices are weak, that stablecoins may not be stable, and that contagion risk within the crypto industry is high,” said Hsu, who has been steadily critical of the sector. Combining all of that, he said, “explains some of the banks’ postures towards crypto.”

U.S. Senators Elizabeth Warren (D-Mass.) and Tina Smith (DFL-Minn.) sent letters to banking regulators this week, asking Hsu, Federal Reserve Chair Jerome Powell and Acting Federal Deposit Insurance Corp. Chair Martin Gruenberg for answers about banks’ involvement in crypto.

“While the banking system has so far been relatively unscathed by the latest crypto crash, FTX’s collapse shows that crypto may be more integrated into the banking system than regulators are aware,” the lawmakers argued in the letters.

In particular, the lawmakers asked Hsu how Alameda Research, a company founded by FTX creator Sam Bankman-Fried, could have invested in Moonstone Bank, a financial institution based in Washington state.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.