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OCC Chief Hsu: Crypto Industry Has Unhealthy ‘Dependency on Hype’
The acting head of the U.S. Office of the Comptroller of the Currency has worked to limit banks’ involvement in cryptocurrencies.
Updated May 11, 2023, 4:56 p.m. Published May 24, 2022, 9:15 p.m.
Michael Hsu, who runs a key U.S. banking agency, said the recent fiery collapse of terraUSD (UST) and the wider drama that came with it should serve as a “wake-up call” to the industry, which he argued has grown too fast.
Hsu, the acting chief of the Office of the Comptroller of the Currency (OCC), spoke at the DC Blockchain Summit in Washington on Thursday, saying the cryptocurrency industry has an unhealthy “dependency on hype” that he thinks is getting worse.
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"The recent collapse of the terraUSD stablecoin and associated sell-off in crypto markets has shown that hype-driven growth can lead to bubbles, harm consumers and crowd out productive innovation," said Hsu, whose agency will likely have a prominent role in regulating stablecoins and chartering crypto firms seeking to become banks. He argued the incident demonstrated that crypto failures can have wider effects as this one "sparked contagion to the largest stablecoin, tether [USDT], and to the broader crypto ecosystem."
Read more: US Senators Lummis and Gillibrand Set to Propose Crypto Oversight Bill Next Month
The self-described “crypto skeptic” said he does see some benefits to the rise of digital assets, but noted he’s satisfied with his agency’s moves to ensure that it’s difficult for traditional banks to become overly exposed to crypto. He ran through a lengthy list of negatives about the industry, including that it's so vulnerable to hackers and doesn't seem to be heading toward a widely shared infrastructure that could be easier to defend.
He also cited the recent admission by Coinbase (COIN) that a bankruptcy could tie up customer's assets. That disclosure from the big U.S. exchange also prodded the Biden administration to decide to press Congress for new segregation rules that would wall off customer assets, CoinDesk has reported.
"For a technology and industry so focused on promoting an 'ownership society,' the lack of clarity on ownership rights, modes of ownership, and custody of digital assets seems like a fundamental problem that needs to be solved," Hsu said.
UPDATE (May 24, 2022, 22:08 UTC): Adds comments from Hsu's speech and context.
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U.S. Senate's Crypto Market Structure Bill Gets Messy as Calendar Weighs Down
The White House has shut down proposals, and lawmakers are circulating the Democrats' asks in what had been a close negotiation, revealing 11th-hour pressure.
What to know:
- Democrats shared a response to Republicans outlining their continuing priorities for a crypto market structure bill, which they said was intended to "reach an agreement and proceed towards a mark-up."
- The document laid out concerns with financial stability, market integrity and public officials' ability to trade and profit off of crypto, echoing concerns laid out in a framework Democrats shared in September.
- The Senate is running out of time in the Congressional calendar to hold a markup hearing — a key step toward progressing the bill — before 2025 ends.
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