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Financial Services Law Insights and Observations

OCC’s Hsu discusses bank cryptocurrency regulation

Bank Regulatory Federal Issues Digital Assets OCC Cryptocurrency Stablecoins

On January 13, acting Comptroller of the Currency Michael J. Hsu spoke before the British American Business Transatlantic Finance Forum’s Executive Roundtable to discuss stablecoins and other crypto-assets regulations. In his remarks, Hsu described stablecoins as “the oxygen of the crypto ecosystem,” noting that they help link cryptocurrencies to fiat currencies. Hsu noted that crypto has “gone mainstream,” providing the example that “[s]ixteen percent of U.S. adults say that they have owned, traded or used some form of cryptocurrency.” In discussing the underbanked and minorities interested in crypto, Hsu quoted a survey finding that “37 percent of the underbanked indicated that they own cryptocurrency, compared to 10 percent of the fully banked.” Hsu argued that banking regulations are designed to mitigate run risks for stablecoins, stating that “[s]tablecoin issuers subject to bank regulation would give holders of those stablecoins confidence that those coins were as reliable and ‘money good’ as bank deposits,” and that “[s]trong, targeted federal regulation of money and banking can help establish a solid foundation for the economy enabling healthy innovation and growth.” While Hsu expressed his excitement for “the pace of innovation in crypto,” he warned that “a careful approach is warranted,” as a result of the “lack of standards and controls in the crypto space.” Hsu also expressed that “bank regulation would give credibility to the ‘stable’ part of stablecoins,” and stressed the need for a coordinated and collaborative regulatory approach “with regards to large crypto intermediaries, which are increasingly operating globally and across a wide range of activities.”