The United States Office of the Comptroller of the Currency issued a statement with the Federal Reserve and Federal Deposit Insurance Corporation on the subject of cryptocurrencies. The OCC wants better risk management measures before banks can deal with the asset class.
The United States Office of the Comptroller of the Currency issued a joint statement on Nov 23, going back on previous bank charter-related rulings. The regulator announced that national banks and financial institutions would have to prove that they have measures in place before they can engage in cryptocurrency, distributed ledger, and stablecoin activities. The statement was made with The Board of Governors of the Federal Reserve System and Federal Deposit Insurance Corporation.
The letter also talks of interagency “policy sprints,” which saw various subject-matter experts conduct a preliminary analysis on cryptocurrencies. These sprints focused on specific issues that relate to the crypto market.
Specifically, the policy sprints focused on developing a common vocabulary for terms used in the crypto market by financial institutions, identifying and assessing key risks related to compliance and consumer protection, and analyzing the implementation of existing regulations. Other focal points of regulation were also a part of the policy sprints, but the aforementioned points cover the gist of it.
Acting Comptroller Michael J. Hsu, who has spoken about the crypto market in the past, said that the letter “reaffirms the primacy of safety and soundness” in a statement that focused on risk management, “Providing this clarity will help ensure that these cryptocurrency, distributed ledger, and stablecoin activities will be conducted by national banks and federal savings associations in a safe and sound manner…banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely.
The letter also makes reference to particular activities taking place in the crypto market that banks may want to engage in. These include crypto-asset custody, customer purchase, and selling of assets, crypto-collateralized loans, and activities involving payments including stablecoins.
US crypto regulations on the horizon
The pace of new statements on the cryptocurrency market by various U.S. regulators indicates that regulations are coming very soon. The SEC, U.S. Treasury, and CFTC have all made some comments relating to regulation in recent months, and a regulatory framework seems very close.
Early in the year, reports suggested that a broad regulatory framework was in the works. Since then, attention has been focused on stablecoins and investor protection measures.
President Joe Biden also nominated a crypto skeptic, Saule Omarova, to lead the OCC in late September 2021. Both Omarova and acting Comptroller Hsu have expressed doubt about crypto in the past. Whether this will translate into stringent regulation remains to be seen.
