The acting head of the Comptroller of the Currency (OCC), Michael Hsu, has called for cryptocurrency firms operating multiple entities in different countries to be overseen by a consolidated “home” regulator. Hsu believes that a single regulator could prevent these firms from “playing games” aimed at skirting regulators, such as masking true risk profiles, as he explained during a speech at the Institute of International Bankers conference in Washington, D.C.
Hsu compared the lack of consolidated supervision in the cryptocurrency industry to the Bank of Credit and Commerce International (BCCI), which was found to be involved in a litany of financial crimes. He said that the “fragmented supervision” of both firms meant that no one authority or auditor could develop a “consolidated and holistic view” of them as they operated across countries with no framework for information sharing between authorities.
FTX is an example of why a consolidated home country supervisor is necessary. The bankruptcy of the crypto exchange showed that the space needed a “home” regulator, according to Hsu. The exchange, which had entities in multiple jurisdictions, was effectively nowhere, allowing it to evade meaningful regulation.
Hsu argued that the international bodies that identified the need for a “comprehensive global supervisory and regulatory framework for crypto participants” should look to the lessons learned from the BCCI case. These include the Financial Stability Board (FSB), the International Monetary Fund (IMF), the International Organization of Securities Commissions (IOSCO), and the Bank for International Settlements (BIS).
To minimize the risks of losing trust in the crypto industry, Hsu believes that regulatory coordination and supervisory collaboration are important. He added that the events of the past year have shown that trust in intermediaries can be quickly lost, causing harm to large numbers of individuals and knock-on effects on the traditional financial system.
He suggested that a consolidated regulatory framework overseen by a home country supervisor could effectively provide oversight of the crypto industry. The Office of the Comptroller of the Currency is a bureau within the Treasury Department responsible for regulating US banks and ensuring the safety of the nation's banking system. It has the authority to permit or prohibit banks from engaging in crypto-related activities.