OCC, Fed, FDIC Mulling Forming an Interagency Policy Team on Crypto

The Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) may set up an interagency policy team to examine the cryptocurrency sector.

Acting Comptroller Michael Hsu told a House Financial Services Committee hearing in Washington, D.C., that he had spoken with fellow regulators Randal Quarles, vice chair at the Federal Reserve, and Jelena McWilliams, the chairwoman of the FDIC, about forming a “sprint team” around crypto. His response was to a question from Rep. Tom Emmer (R-Minn.).

“Prior to this meeting, Vice Chair Quarles, Chair McWilliams and I had talked about potentially putting together an interagency policy sprint team just on crypto because of exactly the concerns you’ve described,” Hsu said.

Later in the hearing, in a response to a question from Rep. Ted Budd (R-N.C.), Quarles said this work could include creating a legal definition for what a cryptocurrency is in the U.S.

“We are engaged with the other agencies in a joint effort to think through some of these crypto definition[s] and some of the applications in crypto areas, and I’m sure that would be part of it,” Quarles said.

Emmer, who is the new ranking member on the House Financial Services Oversight Subcommittee, asked the agency representatives how they are addressing crypto.

Quarles pointed to the Boston branch of the Fed’s work with the MIT Digital Currency Initiative in researching a central bank digital currency. McWilliams noted that the FDIC just published a Request for Information about how banks interact with digital assets.

Todd Harper, chair of the National Credit Union Administration, said his regulatory agency created an office to examine financial technology issues, which will include crypto.

“I think the rise of crypto has garnered a lot of attention,” Hsu said.

In prepared remarks published Tuesday, Hsu said the OCC was reviewing all of its pending matters, including the crypto-related guidance published over the past year.

Digital dollar

The question of a central bank digital currency (CBDC) also came up during the hearing, with Rep. Al Green (D-Texas) asking Fed Vice Chair Quarles about the central bank’s work with MIT.

Green specifically asked how regulators could ensure cryptocurrencies aren’t used for illicit purposes like ransomware payments.

“It’s a complicated question because there’s a range of types of instruments that count as cryptocurrencies,” Quarles said.

However, any financial institutions that interact with cryptocurrencies would have to comply with existing anti-money laundering regulations, he said.

A CBDC specifically could prevent ransomware payments, Quarles said, hinting that know-your customer (KYC) rules may play a role here. However, he also noted the Fed has not committed to launching a digital dollar just yet.

“Whether we would have a central bank digital currency is way premature at this point,” Quarles said.

UPDATE (May 19, 2021, 16:39 UTC:) Updated with additional details from the hearing.