Michael Hsu, chief federal regulator of the nation’s largest banks, said on Friday he found the arguments questioning the long-term value of cryptocurrency “compelling,” while calling for a tough regulatory regime to protect consumers and the economy from the risks posed by stablecoins.
“The rise of Web3 and a blockchain-based digital economy are not inevitable,” Hsu, acting comptroller of the currency, told a lecture at the University of London’s Institute of International Law. Georgetown, highlighting analyzes made by crypto critics, including Signal founder Moxie. Marlinspike and crypto critic and Dan Olson.
Marlinspike argued in a widely read blog post in January that Web3 is a flawed concept because decentralized protocols are inherently inefficient and that developers have been drawn to crypto projects not because they solve problems that centralized Internet companies cannot, but because they See it as a way to get rich quick.
Olson, video essayist, is the producer of a 2 hour viral withdrawaln of cryptocurrencies that compares the crypto craze to the housing bubble that led to the 2008 financial crisis. It has nearly 7 million views on YouTube.
Hsu echoed that metaphor in his comments on Friday, comparing cryptocurrency and blockchain to financial derivatives that supercharged the economic meltdown of the 2000s. He said derivatives genuinely solve problems and help spread better risks, but only when they are well regulated.
“I think where we are with digital assets looks very similar to me, that you’re kind of in the early days and if you can architect it well and avoid excess, you can get closer to the promise and the potential” of the technology, he says.
Despite his doubts about the technology, Hsu said that “it is difficult to ignore the rapid growth of the developer community, market signals regarding the long-term potential of blockchain businesses, and statements and actions of a range of policy makers and governments”.
Hsu argued that Congress and regulators should move quickly to create a stablecoin oversight regime, which he says supports the entire $2 trillion market for cryptocurrencies, even if their market value is only $180 billion.
Stablecoins like tether USDTUSD,
and USD Coin USDCUSD,
are digital assets whose value is indexed to the US dollar DXY,
and are used by crypto investors to trade various digital assets such as bitcoin BTCUSD,
or ether ETHUSD,
and as a stable store of value for uninvested cryptocurrency.
“If there were to be a run on stablecoins, the entire crypto economy would likely be impacted, causing outsized losses for ordinary people who own crypto and potentially leading to a host of other ripple effects. coaching.”
To avoid such an outcome, Hsu argued that legislation should be passed requiring bank-like regulation of stablecoins and mandating the interoperability of dollar-based stablecoins.
Hsu’s remarks follow a series of bills being pushed through Congress that would put in place a new regulatory regime for stablecoins, including a new invoice proposed Wednesday by Pennsylvania Sen. Pat Toomey, the ranking Republican on the Senate Banking Committee.
Ian Katz, an analyst at Capital Alpha Partners, wrote in a note to clients this week that “the field of crypto-related legislation is starting to get crowded,” pointing to competing legislation submitted by Sens Republicans. Bill Haberty of Tennessee and Trey Hollingsworth of Indiana, as well as a bipartisan bill crafted by Senator Cynthia Lummis, a Republican from Wyoming and Senator Kirsten Gillibrand, a Democrat from New York.
He noted that regulatory proposals on stablecoins generally envision a primary role for Hsu’s OCC, while the industry attempts to shape legislation that would regulate the broader crypto economy so that the Commodity Futures Trading Commission is the main regulator of cryptos that are not stablecoins. .
Still, divisions between Democrats and Republicans mean “we don’t expect any major legislation passing Congress this year,” Katz wrote. “Even next year it will be a tough fight.”