Warren asks OCC to scrap Trump-era crypto guidance — and recent work

Less than a month into his tenure as head of the Office of the Comptroller of the Currency (OCC), Acting Comptroller Michael Hsu said he would review three crypto-related interpretive letters issued by his Trump-era predecessor, Brian Brooks: one allowing national banks to provide crypto custody service; a governing bank’s cash reserves backing stablecoins; and one that allows banks to use distributed ledger technology and stablecoins to facilitate payments.

Hsu said at the time that he was trying to build adjustment on cryptocurrency policy in cooperation with the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve. The effort culminated in November with a joint interpretive letter that gave Brooks’ guidance the green light as long as the banks notified their regulators of their plans in advance and could demonstrate that they would operate safely and soundly.

That’s apparently not enough in the eyes of Sen. Elizabeth Warren, D-MA, who last week asked the OCC not only to rescind Brooks’ three interpretive letters but also the joint guidance in November, according to an undated draft of the letter. by Bloomberg and American Banker.

“The interpretive letters issued under your predecessor essentially gave banks unfettered ability to engage in certain crypto activities and remain problematic,” Warren wrote, according to the outlets. “We are concerned that the OCC has failed to address the deficiencies of the previous interpretive letters and the risks associated with crypto-related banking activities, which have become more serious in recent months.”

Bitcoin’s value, for example, has fallen 60% since the OCC, FDIC and Fed issued their inter-agency guidance — which, on two sides, may have surprised some observers with its brevity. However, the agencies indicated that they had identified a number of areas where additional public clarity was needed.

“Through 2022, the agencies plan to provide greater clarity on whether certain activities related to cryptoassets conducted by banking organizations are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations,” the OCC, FDIC and Fed said.

Warren’s letter could essentially challenge regulators to follow through — especially in light of the May collapse of the TerraUSD stablecoin and the July bankruptcies of Voyager Digital and Celsius.

In the letter, Warren asks the OCC to coordinate with the Fed and FDIC “to develop a comprehensive approach that adequately protects consumers and the safety and soundness of the banking system.”

A Warren aide told Bloomberg that the senator is asking other lawmakers to sign the letter.

Hsu said Thursday that he had not seen it yet but looked forward to responding.

“I’m very convinced that everything that comes into the banking system in crypto has to be safe, sound and fair, and we’re going to do what’s necessary in a way that’s sustainable, durable, robust,” he told Bloomberg on Thursday. – I think we are doing a good job. See Exhibit A: a whole bunch of stuff just happened, and the banking system is in pretty good shape, knock on wood. I think part of that is the actions we’ve taken.”

In June at a DC Blockchain Summit, Hsu defended the interagency guidance, saying it had “contributed to the safety and soundness of the banking system despite increased volatility and recent turmoil in crypto markets.”

“The resilience of the traditional banking system to recent events in crypto is not an accident,” Hsu said, according to American Banker. “Rather, it is due, at least in part, to federal banking regulators’ continued and intentional emphasis on safety and soundness and consumer protection.”