WASHINGTON — Two bank trade groups asked acting Comptroller Michael Hsu to deny Sen. Elizabeth Warren’s request that the banking agency abandon Trump-era guidance on cryptocurrency.
Warren, along with Sens. Dick Durbin, D-Ill., Sheldon Whitehouse, D-Rhode Island, and Bernie Sanders, I-Vt., sent a letter earlier this month to the Office of the Comptroller of the Currency asking the agency to rescind a series of interpretive letters issued during the tenure of Trump-era acting comptroller Brian Brooks. In response, the Bank Policy Institute and the American Bankers Association is urging the OCC to reject that request.
The bank groups reiterate what’s become a central talking point in the industry’s attempts to persuade their regulators to allow banks increased access to the crypto space: Regulated banks are better equipped than lesser regulated nonbanks to innovate responsibly, with more robust risk management systems in place, as well as supervision and examination processes.
“Failure to provide clarity regarding the expectations for all banks engaging in crypto activities is hindering the ability of banks to engage in responsible innovation in this space, thereby requiring consumers to look solely to unregulated or lightly regulated nonbank financial service providers and limited-purpose, uninsured banking institutions for digital asset products and services, instead of banks,” the groups said in the letter. “Therefore, we urge you to work with the FDIC and the Federal Reserve to provide clarity regarding the permissibility of, and risk management expectations related thereto, for banks engaged in crypto related activities.”
The letter from the banking groups echoes rising concerns among industry players and some Republican lawmakers that the Biden administration’s approach to cryptocurrency regulation is verging away from the previous “technology neutral” stance. Earlier this week, Rep. Tom Emmer, R-Minn., raised that issue with the Treasury Department over the sanctioning of Tornado Cash.
The Bank Policy Institute and the ABA note that the banking industry was largely insulated from the recent crypto market turmoil, and that “restricting banks from engaging in permissible banking activities utilizing modern technologies” would not mitigate the risks of unregulated nonbanks or the volatility in crypto markets.
The groups also urged the OCC to join other regulators in creating a regulatory framework for cryptocurrency, especially for nonbanks in the industry.
“We agree that to the extent possible, a consistent approach among the federal banking agencies regarding the permissibility of, and risk management expectations for, banks engaged in crypto activities would be helpful to institutions and their customers,” the two groups said in the letter. “The withdrawal of the Interpretive Letters, however, is not necessary to achieve that goal.”