09 September 2022 |

OCC Head’s Skeptical on Fintech-Bank Partnerships



180 Days From Biden’s Executive Order On Crypto

Monday, September 5th marked 180 days since the Executive Order on Ensuring Responsible Development of Digital Assets issued by the Biden Administration. This is important because it was the deadline established for several reports relevant to the industry:

  • Secretary of Treasury’s report on the future of money and payments systems, including adoption of digital assets, and potential implications of a United States CBDC. 
  • Attorney General’s assessment of legislative changes necessary to issue a US CBDC, in case it is considered in favor of national interest. 
  • Secretary of Treasury’s report on the implications of adoption of digital assets, changes in payments systems and financial market infrastructures for consumers, businesses, investors, and equitable economic growth. 
  • Director of the Office of Science and Technology Policy and Chief Technology Officer of the US’s technical evaluation of the infrastructure, expertise, and capacity that would be necessary at relevant agencies in order to issue a US CBDC. 
  • Attorney General’s report on the role of law enforcement agencies in detecting, investigating, and prosecuting criminal activity related to digital assets. 
  • Director of the Office of Science and Technology Policy’s report on the connections between DLT and the economic and energy transitions, as well as its effect on efforts against climate change and the environmental effect. 
  • Secretary of Commerce’s framework for the enhancement of US competitiveness, and leveraging of digital asset technologies. 

It is important to note that all of these reports are interagency efforts that include relevant agencies such as the SEC, FTC, CFTC, and others. Also, recommendations on legislation or regulation are part of most of them. In that sense, it is an important milestone for the Biden Administration’s approach to regulation of the digital asset industry. 

New Fed Vice Chair’s Take On Crypto

Michael Barr, a former Ripple Labs advisor and Michigan University Law School Dean, was appointed by President Biden as the Federal Reserve’s Vice Chair of Supervision on July 19th, and this week he gave some important views around crypto regulation during his first public speech:

  • The Fed will work closely with other bank regulators to ensure that crypto-related activities engaged by banks are well regulated, on the principle of same risk, same activity, same regulation, regardless of the technology being used. 
  • Regulation and oversight of stablecoins is a priority, since it is considered private money, especially in the cases that are designed as a means of payment. He expressed that Congress should work expeditiously to bring stablecoins into the prudential regulatory perimeter. 
  • When asked about the issuance of a US CBDC, he responded that he’s “not in crisis mode”. In accordance with the Fed’s previously expressed public stance in the matter, he said the issuance of a digital dollar is not urgent, and it is important to reach consensus across Congress and the White House before the Fed acts upon it. 

OCC Head Is Skeptical On Fintech-Bank Partnerships

Michael Hsu, Acting Comptroller of the Currency, a major US bank regulator and supervisor, spoke about the risk of a financial crisis driven by the proliferation of fintech services and digital banking:

  • Since most fintech companies do not have a bank charter, they do not fall directly into the oversight of the Office of the Comptroller of Currency. However, increase in fintech-bank partnerships has spurred the attention of the bank regulator. 
  • According to Hsu, fintechs and big tech firms are having a large impact on the financial services industry and warrant more attention from regulators such as his office. Integration of fintech services into traditional financial institutions via embedded fintech or partnerships are increasing complexity and de-integration across the banking sector. 
  • He mentioned the lesson learned from the ‘08 financial crisis: unseen risks tend to grow and later be the source of nasty surprises. In that sense, Hsu expressed concern around the speedy proliferation of fintech services across other industries, including big tech and traditional banking, arguing that unfamiliar risks are being created that could potentially create the next big financial crisis in the future.