• According to the OCC’s head, cryptocurrency and DeFi are disintermediating banking in novel ways

  • The head of the body in charge of overseeing US banks named cryptocurrency and decentralized finance (DeFi) activity as factors contributing to the banking system’s disintermediation.

    Acting Comptroller of the Currency Michael Hsu delivered remarks on the topic of banking trust on Wednesday at a meeting of the Exchequer Club, a group of senior economic and financial policy professionals based in Washington, D.C.

    In his speech, Hsu stated that the main priorities of his office are reducing inequality, adapting to digitalization, combating climate change, and avoiding complacency.

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

    Hsu attributed previous failures of US financial regulators, such as those that contributed to the 2008 financial crisis, to the “siloed” nature of various regulatory bodies’ operations. The OCC chairman also praised the United States Treasury, the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and his own office for working together to coordinate regulatory policies governing digital assets.

    However, aside from the report on stablecoins, which is expected later this fall, the OCC head did not mention any specific results of the working group’s activity.

    Notably, Hsu stated that regulators must “ensure that crypto/DeFi activities that occur within the banking system or are facilitated by banks are trustworthy.” Given that the majority of decentralized finance activity occurs outside of the regulated banking system, it is unclear whether Hsu’s remarks reflect the OCC’s desire to extend its purview over DeFi platforms.

    The OCC is an independent bureau within the United States Department of the Treasury tasked with supervising all national banks and federally licensed branches of foreign banks in the United States. In May of this year, Michael Hsu took over as acting Comptroller of the Currency.

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