A firm that cannot meet the rigorous requirements applicable to other banks should not be allowed to present itself to the public as a bank, said chair of the US Senate Committee on Banking, Housing, and Urban Affairs, Sherrod Brown, in a letter to acting comptroller of the Office of the Comptroller of the Currency (OCC), Michael Hsu.
He pointed to companies like Paxos, Protego and Anchorage as seeking to broaden access to cryptocurrencies and other risky and unproven digital assets and emerging technologies to traditional bank customers. Each company highlights their federally-chartered status – Paxos referring to itself as “cutting-edge technology with bank-level oversight.” In other words, these companies suggest that the OCC’s approval of their charters guarantees their business model is as safe, stable and dependable for customers as a local community bank.
The fact is, given the many uncertainties present in the digital asset landscape as identified by other regulators, the volatility of digital asset valuations, and the disproportionate influence individuals can have on entire cryptocurrency markets, the OCC is not in a position to regulate these entities comparably to traditional banks.
It is also unclear whether the OCC engaged in the appropriate due diligence to stand behind this “seal of approval” before granting these charters. OCC’s Former Acting Comptroller Brian Brooks actively encouraged cryptocurrency companies to apply for a national trust charter because it had “relatively easy requirements” and is “just a faster charter to get.”
Not only could these charter approvals lead customers to underestimate the risks related to these assets, but it could undermine faith in the safety and stability of the entire banking system. In the letter, Brown requested that Hsu reassess any conditional national trust charters and halt the approval of any additional charters to nonbank entities while you review, as well as review the procedures and guidelines followed within the OCC regarding the evaluation and approval of the Anchorage, Paxos and Protego charters.
The OCC, the Federal Reserve, and the FDIC are in talks about an “interagency sprint team” on crypto regulation, according to The Block. During a virtual hearing of the House Financial Services Committee, Hsu’s crypto comments centered on what he sees as “fragmented” regulation the asset class has faced from federal regulators, and he indicated a collaboration towards a unified banking framework for crypto.