Acting Comptroller of the Currency Michael J. Hsu is equating cryptocurrencies to fool’s gold and warns that the unregulated nature of the digital asset environment is reminiscent of what caused the 2008 financial crisis.
The Office of the Comptroller of the Currency (OCC) head also believes that innovation must be balanced with purpose and lessons learned from the past.
Speaking at the Blockchain Association this week, Hsu says,
“I have seen one fool’s gold rush from up close in the lead-up to the 2008 financial crisis. It feels like we may be on the cusp of another with cryptocurrencies (crypto) and decentralized finance (DeFi).
The 2008 crisis holds lessons that can help industry and regulators chart a better path and avoid repeating the mistakes of the past.”
The OCC is an arm the United States Department of the Treasury. The organization’s stated mission is to ensure that “national banks and federal savings associations operate in a safe and sound manner… and comply with applicable laws and regulations.”
Hsu’s comments come amid a larger push by the government to regulate crypto. The U.S. Securities and Exchange Commission (SEC) is embroiled in a lawsuit against Ripple Labs, and SEC chair Gary Gensler says he believes crypto is innovative, but won’t last long without regulation.
Hsu concludes his remarks by advising,
“Financial innovation should be anchored in purpose. Be clear about the ‘why’ – not just clear about the problem that needs to be solved, but also why it is important to solve it. Just because something can be innovated, doesn’t mean it should.
‘We need to meet client demand for correlation,’ was a rationale I heard many times in the lead-up to the 2008 crisis. Meeting that demand created vulnerabilities in the financial system and amplified shocks.”
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