US banking regulator sees less interest in crypto, more curiosity about tokenization

US regulator Michael Hsu, the acting Comptroller of the Currency, said Tuesday that he's seen a drop off in interest in cryptocurrency while intrigue in tokenization grows.

After talking to financial institutions, technology firms and other regulators globally over the past few years, self-described crypto critic Hsu said he sees more of a divide between crypto and the tokenization of real world assets. The crypto world is mostly retail focused, Hsu said, and "remains replete with fraud, scams and hacks."

"It tends to be driven by the hope for speculative gain," Hsu said on Tuesday at DC Fintech Week. "That seems to be the main fuel, and interest in crypto is that maybe I can make some money by investing in X, Y or Z."

The crypto industry has been dealt a few blows over the past years, including the collapses of algorithmic stablecoin Terra, crypto exchange FTX and other crypto firms. The sector also faces ongoing regulatory scrutiny as agencies voice concerns about the potential for fraud.

'Solving an actual problem'

Tokenization, on the other hand, is focused on "solving an actual problem" such as settlement, Hsu said, adding it could simplify fees and frictions in the transaction process.

"When I talk to folks, there is increasing interest in tokenization because it solves a problem, and less and less interest in crypto," Hsu said. His statements on Tuesday were largely in line with comments he made in June. 

"Some have estimated that tokenization of real-world assets could save 35 to 65 percent across the settlement value chain, including, for instance, cost savings of up to $5 billion for equity-post trading. Tokenization of fiat currencies for cross-border payments also holds the promise of reducing frictions, costs, and delays," Hsu said in a speech in San Antonio. "Importantly, tokenization does not require decentralization and trustlessness."