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Concerns are being raised about how the OCC may have exposed the American banking system to the avoidable risks of crypto.
Elizabeth Ann Warren, the United States Senator from Massachusetts, is currently drafting a letter and seeking the support of her colleagues to sign on. According to a Bloomberg report, the letter will be sent to the Office of the Comptroller of the Currency (OCC). However, she aims to change the rule that allows banks to deal with crypto in the way they currently do. Per the draft, Warren wants the OCC to collaborate with the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). She wants the OCC and the Fed to develop a new approach in their handling of banks that deal with crypto. Recall that currently, the crypto guidance on banks is that banks may hold deposits meant as reserves for stablecoins. And they are also allowed to offer some other crypto services. Nonetheless, Senator Warren will forward the final draft of her letter to the Acting Comptroller of the Currency Michael Hsu.
Is the OCC Indirectly Exposing the American Banking System to Risks Related to Crypto?
Before Hsu became the acting head of the OCC, the top banking regulator was led by former Coinbase executive Brian Brooks. During his tenure, Brooks-led OCC signaled that banks could use blockchain technology and stablecoins to facilitate payments. However, when Hsu assumed the position, he almost immediately, expressed his concerns about the initiatives of his predecessor. He claimed they might not have been done in coordination with all stakeholders. Hsu also thought the initiative did not appear to be in line with broader regulatory goals.
By November 2021, the OCC teamed up with the FDIC and the Federal Reserve, when they jointly began to scrutinize the legality of how banks are dealing with crypto. They stated this at the time. But the statement did little or nothing to checkmate the banks’ crypto dealings. And that’s because the OCC website constantly reiterated that there are no changes to the rules and regulations that were issued under Brooks.
Questions are now being raised, however, particularly since the recent downturn in the crypto market. Concerns are also being raised about how the OCC may have exposed the American banking system to the avoidable risks of crypto.
Per the Bloomberg report, Warren wrote in part:
“We are concerned that the OCC has failed to properly address the shortcomings of the preceding interpretive letters and the risks associated with crypto-related banking activities…”
Senator Warren Is Keen on Investor Protection
Meanwhile, Senator Warren’s letter to the OCC is borne out of her passion for consumer protection. She has been a long-time advocate of better regulations but her major aim has always been customer protection.
She also raised many crypto-related issues in the past. From when Russia reportedly tried to evade the European Union sanctions to raising concerns about the negative impact of mining on the environment.
More recently, the Senator also spoke at a hearing that Wall Street firms are profiting from crypto schemes.