Regulatory Update: New Treasury Secretary Questions Crypto-Friendly Policies, Senator: Crypto Companies Using Federal Trust Charters as Marketing Strategy

Former Chief Counsel of the U.S. currency regulator OCC, Brian Brooks, who previously promoted crypto-friendly policies during his tenure, is now being replaced by an Acting Chief Counsel who has stated intentions to review related regulations. He further mentioned that discussions have taken place with the Federal Reserve and FDIC, and there may be plans to establish an internal task force dedicated to cryptocurrency policy.

Insufficient Consultation on Crypto-Friendly Regulations

The U.S. Treasury Secretary Janet Yellen previously nominated Chinese American Michael Hsu to serve as Acting Comptroller of the Currency (OCC). In his statement prior to the House hearing, Hsu pointed out:

What concerns me more is that these regulations have not been fully coordinated with all stakeholders and do not appear to be part of the regulatory framework. I believe that both of the points I have raised should be considered a priority.

Previously, policies promoted during Brian Brooks' tenure included:

• Compliant financial institutions can provide cryptocurrency custody services
• Allowing banks to engage in stablecoin activities and node participation

Shortly after stepping down, Brian Brooks took over as CEO of Binance.US, which may raise suspicions about his motives.

Establishment of Cryptocurrency Task Force

Michael Hsu attended a hearing on 5/20 with Federal Reserve Vice Chair Randal Quarles, FDIC Chair Jelena McWilliams, and NCUA Chair Todd Harper present. Hsu stated:

Prior to this hearing, Quarels, McWilliams, and I discussed the possibility of forming an internal cryptocurrency task force to expedite the advancement of crypto policies.

Hsu's review of previous related crypto policies also includes pending proposals, which encompass applications from crypto companies such as BitGo, a cryptocurrency custodian, and BitPay, a cryptocurrency payment provider.

Fears Impact on Stablecoin Issuer Paxos

It remains unclear if Hsu's actions will affect regulated crypto enterprises, including crypto banks like Anchorage and Protego, as well as stablecoin issuer Paxos, which benefited from policies introduced by Brian Brooks.

Senator Sherrod Brown emphasized that in the past five months, three crypto companies have obtained OCC federal trust charters, namely the aforementioned three. He stated:

These companies are using federal trust charters as a marketing tool, as it signifies they are as secure and reliable as banks. However, in reality, there is still a lot of uncertainty regarding the positioning of digital assets by other regulatory agencies, making it impossible to regulate these crypto entities as banks.