Supervision of crypto-asset activities at financial institutions across the globe needs close coordination and collaboration, despite the resistance and influence of the industry that promotes the digital entities, the regulator of national banks said Thursday.
Speaking to the Financial Stability Board’s (FSB) Crypto Working Group, Acting Comptroller of the Currency Michael Hsu said implementation of the FSB’s global regulatory framework for crypto-asset activities “has been challenging, and no real progress has been made on consolidated supervision.”
“This is, in part, because the crypto industry continues to resist what it sees as improper or over-burdensome regulation and oversight, while jurisdictions continue to compete for crypto business,” Hsu said. “The risk with such competition is that it gives the industry leverage and forces regulators to accommodate and compromise.”
Hsu, who heads the Office of the Comptroller of the Currency (OCC), maintained that collaboration and coordination among financial regulators can serve as an effective mitigant to the risk of over-accommodation of the industry.
“Sharing information with peer agencies and seeking a common understanding of the risks and opportunities in the space can help ensure that regulatory standards remain high,” Hsu said. “The FSB’s efforts in this regard have been extremely valuable.”
Hsu said trust is fragile in maintaining financial stability, noting that once trust is lost it is not readily regained. “Even though the underlying blockchain technology is supposedly trust-resistant, nearly all crypto activities operate through intermediaries, whom users must trust,” he said. “Put simply, there are no shortcuts, which is why the FSB principle of ‘same activity, same risk, same regulatory outcome’ is so important as a guide to this work.”
In other comments, the OCC leader raised the relationship between crypto and tokenization.
“Crypto advocates have cited tokenization as a key use case,” he said. “But if blockchains are not necessary to achieving that, one wonders what the future landscape of tokenized real-world assets and liabilities might look like, and what the financial stability profiles of different scenarios might be.”
Acting Comptroller Discusses Consolidated Supervision of Crypto-Asset Intermediaries