US banking regulator: Crypto crash gives us ‘breathing space’

The rush to issue new crypto regulatory guidelines has slowed as a drop in asset values ​​has made the task less urgent, a top banking regulator has said.

Federal agencies have seen less of a need in recent months to issue planned interagency guidance on how banks should handle digital assets, acting Comptroller of the Currency Michael Hsu said Sept. 7 at a conference. of the banking sector in New York.

The overall crypto market capitalization stood at around $960 billion on September 7, up from around $3 billion in November, according to data provider CoinMarketCap.

He pointed to the collapse of Terra – the ostensibly US dollar-pegged stablecoin TerraUSD, which plunged in value in May – as a major event that disrupted an industry that was “working very quickly”.

“Now there’s just a bit more respite,” he said. “We have the time.”

The Office of the Comptroller of the Currency in November joined the Federal Reserve Board and the Federal Deposit Insurance Corporation in announcing what they called a “policy sprint” on crypto assets. The agencies promised that the move would clarify their expectations for certain banking activities related to digital assets.

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Hsu said the sprint was conceived in a time of “intense curiosity and questions” from banks regarding digital assets, but the industry has since experienced turmoil.

“There’s something we as regulators need to be aware of: Crypto is very hype-driven,” Hsu said.

Hsu also warned that involvement in cryptocurrencies can present particular risks for traditional financial institutions, noting that internet forums are full of stories of “devastated” crypto investors.

He added that for banks that simply want to hold digital assets as custodians, cryptocurrencies, due to their use of keys and disintermediation, are very different from traditional assets that institutions could be used to protect. .

Regulators continue to work with each other on the various issues facing the industry, but are “proceeding with caution now,” Hsu said.

“It’s not that it can’t be solved, but it takes a lot of thought,” he said. “We just want to make sure we’re doing it right.”

Write to Richard Vanderford at [email protected]

This article was published by Dow Jones Newswires, another title of the Dow Jones Group

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