November 04, 2021
by Jonah R. Hecht

On November 3, Acting OCC Comptroller Michael Hsu spoke virtually to the American Fintech Council.  He stated that fintech firms are digitally reassembling the three cornerstones of banking (taking deposits, making loans, and facilitating payments) outside the “bank regulatory perimeter.”  Hsu called for bringing such firms within the perimeter.  No doing so, Hsu said, risks a run on such firms and creates the potential for regulatory arbitrage.  Hsu stated that if “synthetic banking providers” are not subject to the safety and soundness and supervision requirements that banks are subject to, those firms could gain unfair business advantages, which in turn puts pressure on banks to compete.

Hsu also called for crypto firms to become subject to comprehensive consolidated supervision.  According to Hsu, while various regulators may regulate certain aspects of crypto firms (e.g., the SEC may regulate the firm’s broker-dealer), "without a consolidated, holding company supervisor—that is, an agency able to see the big picture and empowered to oversee all subsidiaries, including the unregulated ones—no one outside of the firm can understand how the group operates and how much risk it is taking."

Lastly, Hsu noted that the OCC is deepening working relationships with state regulators like New York’s Department of Financial Services and the Conference of State Bank Supervisors, entities that have in the past sometimes had contentious relationships with the OCC.

The full speech can be found at:

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Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking.  This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.