The OCC, Federal Reserve and FDIC are considering an 'interagency sprint team' for crypto regulation

Quick Take

  • The OCC, the Federal Reserve, and the FDIC are in talks about an “interagency sprint team” on crypto regulation.
  • They are already making a “joint effort” to create a unified framework and set of definitions for cryptocurrency.

Acting Comptroller Michael Hsu wants to collaborate with his fellow regulators on a unified banking framework for crypto.

During a virtual hearing of the House Financial Services Committee on Wednesday, Hsu's crypto comments centered on what he sees as "fragmented" regulation the asset class has faced from federal regulators.

The hearing brought separate regulators with oversight of the nation's banks together for a hearing entitled "Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions." Rep. Tom Emmer (R-MN) pressed each of those in attendance on what their agency is doing related to creating rules for crypto today. Randal Quarles, Vice-Chair of the Federal Reserve Board of Governors, and Federal Deposit Insurance Commission (FDIC) chair Jelena McWilliams focused on internal efforts, which mostly amount to requests for comment from industry participants and studies of the emerging technology related to central bank digital currencies (CBDC) and other innovations.

But Hsu's answer was more collaborative in nature.  He, McWilliams and Quarles have been in conversation about a possible "interagency sprint team" on cryptocurrency regulation related to banking, according to Hsu. Quarles later reiterated that the three are currently engaged in a "joint effort" to come up with unified definitions related to crypto.

"We are focused very intently on these crypto issues with the aim of having answers and joint views very quickly," said Quarles. "I think that's very achievable."

The lack of collaboration among federal regulators on the crypto question is a pain point, according to Hsu. 

"I am concerned that the regulatory community is taking a fragmented, agency by agency approach to the technology-driven changes taking place today," he said.

Hsu's testimony today followed his announcement of a staff review of actions taken by the previous regime at the Office of the Comptroller of the Currency (OCC). That includes pending actions related to crypto, including interpretive letters related to bank custody of stablecoins and stablecoin reserves and crypto firm applications for federal banking charters. That review is slated to finish this summer, according to Hsu.

Former comptroller Brian Brooks made considerable strides related to crypto, though some in Congress accused him of overextending the power of the U.S. banking regulator. Hsu's testimony indicated that he was interested in reviewing all actions to hear from "all stakeholders" more fully.

Now that some crypto firms have federal charters, guidance from the Federal Deposit Insurance Commission (FDIC) may be needed, as Rep. Warren Davidson (R-OH) pointed out. Currently, the FDIC doesn't insure crypto deposits. His question to McWilliams was submitted for the record and will likely be answered in writing in the future.

Similarly, the Federal Reserve just released guidance for "novel institutions" — which includes standards for some newly OCC-chartered firms to gain access to Fed services. The regulator is currently seeking public comment on the guidance. 

Hsu said that U.S. banking regulators need to provide some path to approval for crypto and fintech firms and shouldn't ignore the growing interest in bank charters as a path to compliance. Part of the reason the OCC is conducting its review of pending actions to reexamine necessities and effects that crypto bank charters create in other spaces, according to Hsu. 

"That's why we're re-reviewing [OCC actions on crypto], that that balance is struck in the right way," said Hsu, who added:

"And that we're doing it together because this isn't just happening at the OCC. It's happening in other spaces as well."

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