Crypto and DeFi disintermediate banking in new ways, says OCC head

Speaking at the Exchequer Club meeting, which is an association of senior economists and financial policy experts based in Washington, D.C., Michael Hsu, Acting Comptroller for the Currency, spoke on Wednesday about safeguarding banking trust.

Hsu spoke out naming the top priorities of his office as reducing inequality, adapting to digitalization and addressing climate change.

Speaking on the regulatory challenges emerging as a result of digitization of the financial system, the head of the Office of the Comptroller of the Currency (OCC) listed rising cryptocurrency-related and decentralized finance (DeFi) activity among the innovations driving changes in banking, disintermediating it in novel ways.

Hsu said that previous failures by U.S. financial regulators, such as those which made 2008’s financial crisis possible, were due to the “siloed nature” of different regulatory bodies’ operations. Hsu also praised the collaboration effort of the Federal Reserve, UnitedTreasury and the Securities and Exchange Commission, as well as the Commodity Futures Trading Commission and the Federal Deposit Insurance Corporation. His office was also aimed at coordinating digital asset regulatory policies.

The OCC head didn’t mention any results of the work group’s activities beyond the report on stablecoins, which is expected to be released later in the fall.

Hsu stated that regulators must “Ensure that crypto/DeFi activity that takes place within the bank system or is facilitated by banks is trustworthy.” It is not clear if Hsu’s comments can be understood to reflect OCC’s desire to expand its reach over DeFi platforms.

The OCC, an independent bureau of the U.S. Department of the Treasury, is charged with overseeing all national banks as well as federally licensed branches of foreign bank branches in the country. In May 2011, Michael Hsu was appointed acting Comptroller for the Currency.