Crypto regulation needs a cautious approach, rather than a mad rush, says US Comptroller Michael Hsu.
Michael Hsu, the Acting Comptroller of the Currency, highlighted the importance of crypto regulatory proceedings in a thoughtful and cautious approach.
The speedy settlement or chasing is not the appropriate solution when it comes to cryptocurrency, the official said.
Regulations Are Coming
According to the OCC, progress on this front requires a full understanding and smart adaptation in order to ensure the industry’s safety, soundness and mitigate risks.
The official made his statements in round-table discussions on “Institutional Investors and Crypto Assets” at the Harvard Law School on Oct. 11.
The experience of his young adulthood gave Hsu insights into the shortcomings of rushing. The fear of missing out (FOMO) effect gives no neutrality.
Rushing is not an optimal choice for policymakers and financial regulators, which could eventually stifle technology innovations, instead of encouraging them.
“Promises of innovation and inclusion often mask crypto’s promotion of a gold rush vibe that exploits people’s fear of missing out on the next Google or Amazon.”
Hsu pointed out that the US regulators are pursuing two approaches to bring “crypto into the regulatory perimeter” – complying crypto with regulations and adjusting regulations to suit the industry’s growth.
However, the exclusive focus on the latter approach potentially re-creates the mistake linked to the 2008 financial crisis.
Close and effective collaboration is needed for numerous regulatory bodies when approaching crypto regulation. Hsu reflected on the joint effort between the OCC, the Federal Reserve System, FDIC, and Federal Reserve.
Last year, the FDIC, in conjunction with the Federal Reserve and the Office of the Comptroller of the Currency (OCC), announced their intention to work together in order to clarify the regulatory landscape for financial institutions that deal with crypto assets, such as stablecoins.
As reported, the FDIC intended to publish a number of policy statements in the coming months that would provide guidelines for banks.
In addition to calling for interagency efforts, regulatory clarity is also one major highlight of Hsu’s speech.
It is especially important, given the fact that a significant number of market participants are not aware of the risks that could happen within the space. A series of troubled firms’ incidents like Celsius, Three Arrows Capital, and Voyager Digital is a painful yet valuable lesson.
Regulators Look for Solutions
According to Hsu, three areas that require additional clarity are “liquidity risk management of deposits from crypto-asset companies, including stablecoin issuers, finder activities, especially related to crypto trade facilitation, and crypto custody.”
Hsu said that, so far, interagency works have made a lot of progress in the first two areas.
In conclusion, the reputable cryptocurrency skeptic expressed some concerns about the hype and fixation around trading.
The official is, on the other hand, quite supportive of the potential benefits of cryptocurrencies. There is a compelling rationale for regulators and lawmakers to understand new technology and its capabilities in order to increase benefits and cutoff risks.
It’s surprising that bankers are increasingly eager to get involved with the crypto sector.
Compared to the early dates of Bitcoin and other cryptocurrencies, institutional interest has become more serious. Hsu has repeatedly warned banks regarding their involvement with the digital assets market.
Banks Are Getting Involved
BNY Mellon, the oldest bank in the United States, started providing crypto custody services earlier this week.
The new service allows investment funds, institutional clients, and major clients of the bank to store cryptocurrencies such as BTC and ETH alongside traditional assets in the bank’s custody services.
The move is also beneficial for traditional firms that want to invest in crypto assets but are put off by concerns about custody and security. This is a significant step in bringing traditional institutions closer to cryptocurrency.