Crypto Firms from Different Countries Should be Regulated by local regulator-Regulator
2023.03.07 03:13
Crypto Firms from Different Countries Should be Regulated by local regulator-Regulator
By Kristina Sobol
Budrigannews.com – The acting head of the banking regulator in the United States has stated that in order to prevent cryptocurrency companies from engaging in “games” aimed at skirting regulators, they should be overseen by a single consolidated “home” regulator.
The remarks were made in prepared remarks for the March 6 Institute of International Bankers conference in Washington, D.C. by acting Comptroller of the Currency (OCC) head Michael Hsu. The OCC is a Treasury Department bureau that regulates U.S. banks and aims to ensure the safety of the country’s banking system. It can allow or prohibit banks from participating in crypto-related activities.
Hsu gave “useful lessons for crypto” from traditional banking on how to maintain global trust in his speech.
It’s good to hear from Michael Hsu, Acting Comptroller at @USOCC. IIBAWC2023 image: https://twitter.com/SWFGaUC0yv
He asserted that individuals working with businesses in multiple jurisdictions will “potentially play shell games” by arbitraging regulations and will be able to “mask their true risk profiles” if a crypto firm is not regulated by a single entity.
To be clear, not all global crypto players will implement this strategy. However, until a credible third party, such as a consolidated home country supervisor, is able to meaningfully oversee them, we won’t be able to determine which players are trustworthy.
“At this time, no cryptocurrency platforms are under consolidated supervision.” None,” he continued.
The bankruptcy of the cryptocurrency exchange FTX was used as an illustration of the need for a “home” regulator in the sector. Hsu compared the transaction to the similarly defunct Bank of Credit and Commerce International (BCCI), a global bank found to have been involved in numerous financial crimes.
Michael J. Hsu, Acting Comptroller of the Currency, talks about the failure of the Bank of Credit & Commerce International in 1991, which changed the way global banks are supervised in big ways, and how it is similar to the crypto exchange FTX. You can find out more at pic.twitter.com/7e45zgMbE6
Hsu stated that due to their “fragmented supervision,” neither auditor nor authority could develop a “consolidated and holistic view” of them because they operated across countries without a framework for sharing information.
“They were effectively nowhere and were able to evade meaningful regulation by structuring entities in multiple jurisdictions and assuming they were everywhere.”
Hsu stated that while the Bitcoin (BTC) white paper’s arguments were “elegant,” crypto “has proven to be extraordinarily messy and complex” in support of such oversight.
In addition, he stated that peer-to-peer payments are “virtually nonexistent” and that cryptocurrency has primarily evolved into an alternative asset class dominated by trading activity that necessitates intermediaries in order to “operate at any scale.”
“The events of the past year have shown that trust in those intermediaries can quickly be lost, a large number of people can be harmed, and the traditional financial system can be affected in a negative way,”
According to Hsu, the international bodies that recognized the need for a “comprehensive global supervisory and regulatory framework for crypto participants” may look to the BCCI case’s lessons.
Hsu specifically mentioned the Bank for International Settlements (BIS), the International Monetary Fund (IMF), the International Organization of Securities Commissions (IOSCO), and the Financial Stability Board (FSB).
To establish standards for a global crypto regulatory framework, the FSB, IMF, and BIS are currently working on papers and recommendations. “Trust is a fragile thing.” Hsu stated, “It is easy to lose and hard to earn.”
“The risks of losing that trust can be mitigated by regulatory coordination and supervisory collaboration. In banking, we have had to learn this the hard way. I believe it contains crypto-relevant lessons.
