Massachusetts Democrat Elizabeth Warren is circulating a letter among her Senate colleagues that would ask a key US bank regulator to withdraw legal guidance that has underpinned Wall Street’s foray into crypto.
Warren wants the Office of the Comptroller of the Currency to pull a series of Trump-era interpretations that paved the way for banks to offer services like crypto custody for clients. The letter, a draft copy of which was reviewed by Bloomberg News, calls on the OCC to work with the Federal Reserve and the Federal Deposit Insurance Corp. to replace them with an approach “that adequately protects consumers and the safety and soundness of the banking system.”
Warren is currently asking colleagues to sign on to the letter, and plans to soon send a final version to OCC acting head Michael Hsu, said an aide for the senator.
When asked about the draft letter on Thursday, Hsu said that he hadn’t yet seen it and that he looked forward to responding.
“I am a very strong believer that anything 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 said in an interview at the Philadelphia Federal Reserve’s Sixth Annual Fintech Conference.
“I think we’re doing a pretty 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,” Hsu added.
After several recent high-profile blowups cost investors billions of dollars, pressure has been mounting for lawmakers and regulators to clamp down on corners of the crypto market. Warren, who’s a member of the Senate Banking Committee, is among the lawmakers who have been most critical of the asset class.
“Cryptocurrencies are highly volatile assets that offer few, if any, protections to retail investors,” the letter says.
The recent turmoil, including the collapse of the TerraUSD stablecoin and bankruptcies of several digital-asset firms, has increased concern that OCC’s past actions may have exposed the banking system to “unnecessary risk,” the letter says.
The OCC under the Biden administration confirmed in November that banks can participate in certain crypto activities, but only after they’ve obtained written approval from their supervisory office. The letter says that while that updated guidance aimed to rein in risks, it didn’t go far enough to do so.
“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, which have grown more severe in recent months,” the letter says.
While Wall Street banks have shown more interest in crypto, they’ve still remained largely on the sidelines in part due to lingering legal questions in the US.
The letter closes with a series of questions for the regulator, including asking the OCC to name the regulated banks that are currently offering crypto-related services and inquiring about the estimated total dollar volume of those activities.
— By Allyson Versprille (Bloomberg)
–With assistance from Beth Williams and Evan Weinberger (Bloomberg)