The OCC Chief feels that bank regulation of stablecoins would be beneficial to the crypto industry as well as the financial system’s security.
All national banks in the United States are regulated by the Office of the Comptroller of the Currency (OCC). However, the agency’s acting head stated that the agency has the resources to bring stablecoins under its control as well.
“Bank regulation would add credibility to the ‘stable’ element of stablecoins,” Acting Comptroller Michael Hsu stated at an executive roundtable on “The Future of Crypto-Assets and Regulation” at the British American Business Transatlantic Finance Forum.
Hsu postulated a scenario in which holders of USDT, USDC, and other currency-pegged assets no longer trust that they’re entirely redeemable for the cash that purportedly backs them, calling stablecoins “the oxygen of the crypto ecosystem” due to their function as a bridge to fiat currencies. (Tether claimed for years that it was entirely backed by the dollar before retracting and claiming cash and cash-equivalent reserves.)
“Vulnerabilities that lead to a run don’t usually come out of nowhere,” Hsu cautioned. “They accumulate over time and are mostly ignored until a tiny group of individuals detects the tail risk, becomes uneasy, and begins to quietly back away.”
According to Hsu, it’s a win-win situation for stablecoin holders and the crypto industry. Stablecoin redemptions would be a non-issue in such a scenario, he argued, while regulatory stability, which crypto projects have long desired, would spur innovation. Furthermore, in Hsu’s opinion, it’s a win for the financial system as a whole, due to the growing interconnection of crypto and conventional finance; too light a touch, and people who have never heard of crypto could be lured in.
Though he cites numerous areas in which the OCC has attempted to better comprehend crypto, he laments the reality that financial authorities have no idea “how the firm as a whole runs, how much risk it is taking, and whether it is profitable.”
It’s a wrap for this story.
