OCC says digital asset innovators must avoid another financial crisis
On September 21, acting Comptroller of the Currency Michael J. Hsu spoke before the Blockchain Association to discuss similarities between the current growth of cryptocurrencies and decentralized finance (DeFi) and credit default swaps in the early 2000s. In prepared remarks, Hsu emphasized that while innovation is exciting and presents the opportunity for unlocking great potential—especially in areas relating to blockchain, distributed ledger technologies and DeFi—innovators and leaders have a responsibility to learn from the past to avoid repeating mistakes that led to the 2008 financial crisis. Noting that many people believe crypto/DeFi “can dramatically increase financial inclusion,” Hsu pointed to a poll showing that should it be proven that there is “fool’s gold” within the cryptocurrency space, the underbanked and non-Whites will bear the burden the most as they reportedly own more cryptocurrency than other consumers. Hsu instructed innovators to make sure financial innovation is anchored in purpose and actually serves to expand access to banking services and credit. He also highlighted the importance of speaking up and raising difficult and inconvenient questions to “help ensure better and more sustained innovation in the long term,” as well as having a straightforward explanation for how money is made and lost in the crypto/DeFi space. Hsu’s observations may signal increased scrutiny by the OCC of digital assets, including in the areas of risk management and safety, and soundness generally.