Acting Currency Controller Hsu Comments on Crypto at FinTech Policy Summit

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On November 3, the Acting Comptroller of the Currency, Michael J. Hsu, remark at the American Fintech Council’s 2021 Fintech Policy Summit on the growth of digitalization of banking, including the trend and risks associated with keeping cryptocurrency outside the banking regulatory system (we have discussed previous remarks from Hsu on Crypto Trends & Risks in a previous Consumer Finance & FinTech Blog Article here). Hsu noted that the cryptocurrency space includes “synthetic banking providers” (SBPs) that “operate beyond the reach of banking regulators and without banking rules.” Hsu noted that “[m]one of these universal crypto companies is promoting itself as regulated. But this is a half-truth. Hsu also argued that the “bundling” of banking activities of accepting deposits, making loans and facilitating payments by fintechs and the fragmented supervision of universal crypto firms pose significant risks to consumers, businesses. and financial stability.

Hsu stressed that all participants in the banking space must “take it to the next level,” including removing “the disparity between the rights and obligations of banks and the rights and obligations of synthetic banking providers by keeping SBPs up to standard. banking ”. He stressed that regulators must engage with each other with “less regulatory competition and more cooperation, less parochialism and more teamwork, and less self-reliance and more interdependence ”. Hsu also argued that “universal crypto companies. . . should include comprehensive and consolidated supervision. . . and regulators should prioritize developing policies, personnel, and supervisory approaches to bring these businesses safely within the regulatory perimeter of banks. “

Hsu also announced that the recent OCC review of cryptocurrency-related banking charter applications and interpretive letters has been completed, and that in the coming weeks, OCC decisions and comments from candidates for the banking charter will be communicated. In addition, the results of the “crypto sprint” resulting from the work between the OCC, the Federal Reserve and the FDIC have also been completed and the results will be communicated shortly. Hsu said that “the content of these communications – on charter decisions, interpretive letters and the crypto sprint – will be largely aligned with the vision for the banking regulatory perimeter outlined here today.”

Put into practice : As regulators continue to create a framework to underpin crypto offerings, banks and non-bank fintechs that decide to offer crypto will need to develop a risk and compliance framework specific to digital assets, based on identification. depth of risk, industry best practices and existing regulatory expectations. The characteristics of the framework will vary depending on whether banks are creating, acquiring, or partnering with fintechs’ crypto experience. In any case, participants should keep Hsu’s remarks in mind and ensure that they “take it to the next level” when it comes to anything crypto-related, including management capabilities. risks and consumer practices.

In addition, Hsu’s criticism of SBPs further points to an intention to reduce OCC’s support for banking-fintech partnerships that fueled the rapid disruption of traditional banking services such as loans, deposits and payments. Hsu, a potential candidate for the post of permanent controller of the currency if President Biden’s appointment of Saule Omarova does not result in Senate confirmation, testified in August to the Senate Committee on Banking, Housing and Urban Affairs that the OCC was exploring ways to “differentiate between damaging rental agreements and healthy partnerships that expand access to credit.”

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 313


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