Michael J. Hsu, the Acting Comptroller of the Currency, mentioned that there is a need for extensive collaboration and coordination with major crypto intermediaries to deeply understand the risks that exist within the thriving $2 trillion crypto market.
Hsu insisted that the mainstreaming of cryptocurrency has already happened despite the regulatory and legal uncertainty that surrounds the nascent market. Also, hacks, scams, and other disruptive events have not deterred the rapid growth of the crypto sector.
While speaking at the Transatlantic Finance Forum on the topic of “The Future of Crypto-Assets and Regulation”, Hsu highlighted the various venues. He said that nonfungible tokens (NFT), crypto exchanges, and the metaverse are some of the venues where anybody who has an internet connection can invest. He continued:
“The mainstreaming of crypto has occurred despite regulatory and legal uncertainty, and a series of scams, hacks, and other disruptive events. For financial regulators like me, this presents a host of questions. Where regulatory attention should be focused? What should be done? By whom? And why?”
Based on the statement by Hsu, the Office of the Comptroller of the Currency (OCC) kept reminding banks that they need to demonstrate adequate capability before they get any federal permission to invest and engage in crypto activities.
The acting Comptroller also focused on the increasing risks in crypto markets as the holders of USD-backed stablecoins trust that they can readily redeem their stablecoins for US dollars on demand, at par, without any questions asked:
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“What if, however, that trust were to waver or be lost? Stablecoin holders, knowing that the first to redeem would have the highest chance of getting their money back, would rationally redeem immediately.”
Regulators Collaborate With Crypto Intermediaries
Hsu supports collaboration with crypto intermediaries to mitigate the consequences of a loss of trust in cryptocurrency. He concluded:
“While banks and trust companies have a long and successful history of custodying and safeguarding assets, the technology underlying crypto and the associated governance with certain tokens present a host of novel issues warranting careful analysis and consideration.”
During his confirmation hearing in the past week, the Federal Reserve chair Jerome Powell confirmed that the agency will publish a new report on digital currencies although it is not yet “quite where we needed to get it.”
Based on previous reports, Powell said that the current changes in monetary policy that is expected to address policy surrounding the probable rollout of a central bank digital currency in the US:
“The report really is ready to go and I would expect we will drop it — I hate to say it again — in coming weeks.”