OCC: Banking Regulation Would Mitigate Crypto Risk | Sheppard Mullin Richter & Hampton LLP

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On Nov. 3, Acting Comptroller of the Currency Michael J. Hsu made a remark during the BritishAmerican Business Transatlantic Finance Forum 2021-2022 Executive Roundtable on the regulation of stablecoins and other cryptoassets (we discussed Hsu’s previous remarks on crypto trends and risks in previous Consumer Finance & FinTech blog posts here, here, and here). In his remarks, Hsu pointed out the following:

Large US-based multinational corporations are beginning to accept cryptocurrency payments, and several publicly traded companies now hold Bitcoin in their investment portfolios. Additionally, 16% of American adults report owning, trading, or using some form of crypto, while 37% of underbanked and minorities reported owning crypto. The widespread adoption of crypto means that regulatory attention should shift to stablecoins (we have already discussed stablecoins here), where regulating stablecoin issuers as banks could enable more innovation in crypto and make these innovations more sustainable. Hsu pointed out that regulating stablecoins would give holders confidence that these coins were as reliable and “profitable” as bank deposits. There needs to be closer collaboration between regulators to ensure a financial system that is free and free from organized crime and money launderers. Hsu applauded the agencies for establishing a regulatory roadmap (which we have already discussed here) and referenced the recently released interpretive letter 1179 reminding banks that permission to engage in crypto is conditional on them demonstrating that they can do so safely and securely (which we discussed earlier here).

Putting it into practice: This latest statement is a reminder that institutions seeking to engage in crypto-asset-related activities should provide coordinated and timely clarity, where appropriate, to promote safety and soundness, consumer protection and compliance with applicable laws and regulations, including the fight against money laundering and illicit finance laws and rules. These institutions should also pay particular attention to the developing regulatory framework in the United States and beyond. We plan to provide these updates as they become available.

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