US Senators Warren, Sanders Ask Key Bank Regulator to Rescind Crypto Guidance

U.S Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Richard Durbin (D-Ill.) and Sheldon Whitehouse (D-R.I.) asked the Office of the Comptroller of the Currency to rescind interpretative letters allowing banks to engage in crypto activities and explain how involved banks are becoming in crypto.

In an open letter addressed to Acting Comptroller Michael Hsu, the lawmakers said they were concerned that several interpretative letters published in 2020 and 2021 under former Acting Comptroller Brian Brooks (now CEO of crypto company Bitfury) that allowed banks to provide crypto custody services, issue payments with stablecoins, bank stablecoin issuers and engage in other crypto-related activities “essentially granted banks unfettered opportunity” to engage in problematic crypto activities. The interpretative letters, which also includes one published during Hsu’s tenure, did not address any of the risks tied to crypto banking activities, the lawmakers said.

“Given the risks posed by cryptocurrencies to banks and their customers, we request that you withdraw OCC Interpretive Letters 1170, 1172, 1174, and 1179 and 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,” the letter said.

The OCC issued these letters between July 2020 and January 2021, when Brooks helmed the regulatory agency. At the time the crypto industry saw the guidance letters as potentially aiding mainstream adoption of crypto by letting regulated institutions – banks – become more involved in the industry.

Crypto activities do not have much in the way of retail protections, the lawmakers said, pointing to the collapse of Terra and Three Arrows Capital, and the bankruptcies of Celsius Network and Voyager Digital.

“While you declared that ‘there has been no contagion from cryptocurrencies to traditional banking and finance’ during this recent market turmoil, it is clear that stronger protections are necessary to mitigate crypto’s risks to the financial system and consumers,” the lawmakers said.

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The senators also asked a series of questions about how many banks have been approved to engage in crypto activities, what kinds of services those banks provide, the dollar volumes the banks hold tied to crypto and whether any of these banks are involved in other crypto-related activities such as trading derivatives.

UPDATE (Aug. 10, 2022, 18:15 UTC): Adds additional context.