Democrats Led By Elizabeth Warren Ask OCC To Restrict Banks From Crypto-Related Activities

U.S. Senator Elizabeth Warren of Massachusetts has led three other Democratic senators in asking acting Comptroller Michael Hsu of the Currency to revoke the guidance that lets National banks engage in crypto-related activities.

Warren and Senators Dick Durbin of Illinois, Bernie Sanders of Vermont and Sheldon Whitehouse of Rhode Island noted in an open letter dated Aug. 10 that the actions of the Office of the Comptroller of the Currency (OCC) on crypto "may have exposed the banking system to unnecessary risk." They then asked that Hsu "withdraw existing interpretive letters that have permitted banks to engage in certain crypto-related activities."

Warren, who is a member of the Senate Banking Committee, and the three senators pointed out in the letter that the OCC has failed to implement measures to safeguard banks from the recent crypto market turmoil and protect banks and their clients from financial disasters.

The senators noted that under Brian Brooks, the predecessor of Hsu, the OCC issued three interpretive letters related to cryptocurrencies that authorized banks to engage in certain crypto-related activities. Brooks authorized banks to provide cryptocurrency custody services for customers, hold deposits that serve as reserves for certain stablecoins and operate independent node verification networks (INVNs) and stablecoins for payment activities.

They went on to say that in a letter issued in November 2021, under Hsu, the OCC noted that "the previously addressed activities 'are legally permissible for a bank to engage in, provided the bank can demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe and sound manner.'"

The senators concluded the letter by noting that due to the risks posed by cryptocurrencies to banks and their customers, the OCC interpretive letters issued under Brooks and Hsu should be revoked. They also asked OCC to "coordinate with the Federal Reserve and the Federal Deposit Insurance Corporation to develop a comprehensive approach that adequately protects consumers and the safety and soundness of the banking system."