Markets Wired

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today released the following statement in support of the Financial Stability Oversight Council’s (FSOC) Report on Digital Asset Financial Stability Risks and Regulation.

I would like to start by thanking Secretary Yellen, the member agencies, and all the staff for carefully examining the dynamics and structures within crypto-asset markets against the existing regulatory frameworks to identify the most significant financial stability risks that crypto-assets, activities, and markets may pose to the broader financial system.

I support the Report on Digital Asset Financial Stability Risks and Regulation and would like to draw special attention to the recommendations focused on minimizing regulatory arbitrage.

We know from the 2008 financial crisis what happens when regulatory agencies fail to coordinate effectively on risks that cut across jurisdictional lines:  an unlevel playing field emerges and financial stability risks grow in the shadows.  The Council was established by Congress to address that problem.  However, for the Council to work as designed, each member must consider financial stability from a systemwide perspective first and foremost.  This is especially important in emergent areas like crypto.

With this in mind, I believe it is critical for the Council and Congress to prioritize Recommendation 4 regarding interagency coordination, Recommendation 5 regarding a federal prudential framework for stablecoin issuers, and Recommendation 6 regarding regulatory visibility and authorities over all of the activities of crypto-asset entities.  Properly implementing these recommendations will help mitigate regulatory arbitrage and, thus, risks to financial stability.

In the meantime, we at the OCC are committed to ensuring that the nexus between crypto and the federal banking system does not become a channel for cross contagion, while also supporting innovation and progress.

I look forward to continuing to work with all stakeholders on addressing the risks and opportunities presented by digital assets while protecting consumers and businesses and ensuring the continued stability of the US financial system.

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