Michael Hsu said this approach would require more cooperation from both federal and state regulators, with “less regulatory competition” and “more interdependence.”
Michael Hsu, the acting head of the United States Office of the Comptroller of the Currency, hopes to address gaps in supervision for companies dealing with cryptocurrencies.
In published comments before the Federal Reserve Bank of Philadelphia on Tuesday, Hsu called for consolidated supervision for crypto firms in which regulators or an authorized group could conduct oversight of a company and its subsidiaries to mitigate risk. According to Hsu, the current landscape allows holding companies engaging in crypto activities to potentially avoid regulations through subsidiaries.
“No crypto firm is subject to comprehensive consolidated supervision,” said Hsu. “This means that there are gaps in supervision, and risks can build out of the sight and reach of regulators.”
Hsu said this approach would require more cooperation from both federal and state regulators, with “less regulatory competition” and “more interdependence.” As a starting point, he suggested the OCC could lead the way in determining “where the line for comprehensive, consolidated supervision should lie” and how to implement it, but added the task was larger for any single regulatory agency to handle:
“If we can define synthetic banking, determine which crypto activities should be separated, and identify the attributes of crypto firms warranting consolidated supervision, we may be able to temper the excesses of the boom-bust-reform cycle. The goal is not to stop business cycles, but to maintain trust.”
The OCC head has previously called for the industry to apply “lessons from the 2008 crisis” to potentially avoid some of the risks associated with crypto as the number of users continues to grow in the United States. He cited an unregulated subsidiary of insurance giant American International Group — center stage in the financial crisis — as an issue that might have been avoided with consolidated supervision.
Treasury Secretary Janet Yellen designated Hsu as the acting OCC head in May, but President Joe Biden has since picked former policy advisor Saule Omarova to lead the institution. Omarova will be speaking before the Senate Banking Committee on Nov. 18 as part of her nomination.