Distrust of Crypto Isn't Going Away According to U.S. Bank Watchdog

Regulatory agencies in the United States have largely isolated the banking system from heavy involvement in the crypto industry, and the Acting Comptroller of the Currency intends to maintain that position.

As acting chief of the banking agency under President Joe Biden's administration, Michael Hsu has been critical of crypto and reversing course with the agency, which had been the most welcoming corner of the federal government for digital assets under previous management. In 2015, the OCC and other banking regulators established policies requiring lenders to ask permission before engaging in any cryptocurrency activities and to demonstrate that the activity will be completely safe.

At a conference sponsored by the Clearing House and Bank Policy Institute, one of the largest annual banking policy conferences, he reiterated that position. According to Hsu, the collapse of Terra and Luna in May spread contagion across cryptocurrencies, resulting in several crypto platforms failing, numerous exchanges closing, and large losses and staff reductions at several publicly traded companies.

Federally regulated banks, however, have largely remained unaffected. "This is partly due to the careful and cautious approach we adopted and intend to maintain for the foreseeable future."

The Federal Reserve, the OCC, and the Federal Deposit Insurance Corp. are all involved in U.S. government discussions about how to address oversight of stablecoins, such as Tether's USDT and Circle Internet Financial's USDC. Federal agencies also consider dealing with the tokens as a financial stability concern. They are designed to maintain a steady valuation by being tied to assets such as the dollar.

—Crypto Weekly