The collapse of cryptocurrency exchange FTX and the concerns about the unregulated nature of crypto markets dominated a Senate Banking Committee hearing today on financial industry regulation. Top officials from the FDIC, Federal Reserve, OCC and National Credit Union Administration fielded multiple questions from committee members about cryptocurrency risks and whether there should be more regulation of the sector, although little in policy specifics was proposed.
“This year we’ve seen cryptocurrency values collapse by $2 trillion, markets crash, crypto exchanges implode and file for bankruptcy, investors losing their money or worse, losing their jobs,” said committee chairman Sen. Sherrod Brown (D-Ohio). He compared the current cryptocurrency boom to risky speculation that led to past financial crises, such as the housing market crash that caused the 2008 recession. He added that unlike bank or credit union deposits, cryptocurrencies are not insured by the government “and they shouldn’t be.”
Ranking Member Sen. Pat Toomey (R-Penn.) took issue with what he said was the insinuation that the technology itself was inherently risky. “This is fundamentally not about the kind of assets that were held by FTX. It’s about what individuals did with those assets,” he said. The senator pressed Acting Comptroller of the Currency Michael Hsu on whether the OCC discouraged banks from providing custody services for cryptoassets. “It seems to me if people had access to custody services provided by a wide range of institutions, including regulated financial institutions, they might be able to sleep more comfortably knowing that those assets are unlikely to be used for some completely inappropriate purpose,” Toomey said.
Hsu said the OCC discourages banks from doing things that are not “safe, sound and fair.” Banks have been providing custody of traditional assets for a long time, he added, but the custody of crypto is different. “There are some underlying fundamental issues and questions … which have not been fully worked out.”