- FTX illustrates the need for a “unified home country regulator,” according to Acting Comptroller Michael Hsu
- Hsu shared “important lessons for crypto” in his speech about maintaining public trust in traditional banking
According to one of the United States’ top banking officials, cryptocurrency companies operating many organizations in different countries should be under the control of a single, consolidated “home” regulator. This is to prevent them from engaging in ‘games’ intended to circumvent laws.
The words were delivered in prepared remarks by Michael HsuActing Chief of the Comptroller of the Currency (OCC), at the Institute of International Bankers Conference March 6 in Washington DC
The OCC is a department of the Treasury Department that oversees U.S. banks and works to protect the stability of the country’s financial system. It can approve or disapprove banks’ participation in crypto-related operations.
Good to hear from Acting Controller @USOCC Michael Hu. #IIBAWC2023 pic.twitter.com/SWFGaUC0yv
— IIB (@IIBnews) March 6, 2023
Crypto lessons on traditional banking
In his speech, Hsu offered “valuable lessons for crypto” about maintaining the global trust of traditional banking.
He claimed that those working with companies in different jurisdictions would be “potentially playing shell games” by arbitrating regulations. After that, they can “hide their real risk profiles”, unless a crypto company is controlled by a single authority. He said,
“To be clear, not all global crypto players will do this. But we will not be able to know which players are trustworthy and which are not until a credible third party, such as a consolidated home regulator, can meaningfully monitor them.”
The failure of the cryptocurrency exchange FTX has been cited as evidence of the need for an “at home” regulator in the industry. Hsu compared the transaction to that of the now-defunct Bank of Credit and Commerce International (BCCI), a major international bank that was discovered to have committed a long list of financial crimes.
Previously, Kristin Smith, CEO of the Blockchain Association, a well-known US crypto industry charity, advocated for Congress to pass cryptocurrency legislation and make it a more “transparent process.” One in which the entire market is scrutinized “extensively”.
In a interview with Bloomberg on Feb. 22, Smith had claimed that despite the process being “extremely slow” and authorities “intervening” in the meantime, the industry wants US lawmakers to lead crypto legislation.
An alternative asset class?
According to Hsu, both companies operated internationally without a system for sharing information between authorities. In these cases, no authority or auditor can have a “consolidated and holistic perspective” of them.
Peer-to-peer payments are “almost non-existent,” he continued, adding that cryptocurrency has largely evolved into an alternative asset class dominated by trading activities that require intermediaries to “function at any scale.”
The organizations he specifically mentioned were the Financial Stability Board (FSB), the International Monetary Fund (IMF), the International Organization of Securities Commissions (IOSCO), and the Bank for International Settlements (BIS).