Durbin, Whitehouse, Sanders join effort to revoke OCC crypto guidance

WASHINGTON — Three prominent Democratic senators joined an effort to eliminate Trump-era regulatory guidance that cleared national banks to explore digital assets and other crypto-related banking activity. 

In a letter first drafted and circulated last week by Sen. Elizabeth Warren, Democrat of Massachusetts last week, the lawmaker urged the Office of the Comptroller of the Currency to rescind a series of interpretive letters issued during the tenure of the acting comptroller, Brian Brooks. 

On Wednesday, Warren's office announced the letter had been sent to the OCC and that three additional senators had signed on to it: Dick Durbin, D-Ill., Sheldon Whitehouse, D-Rhode Island, and Bernie Sanders, I-Vt. 

Of the quartet, only Warren currently sits on the Senate Banking Committee. But Durbin, Sanders and Whitehouse have all served in the U.S. Senate for more than a decade and hold significant influence on Capitol Hill, and their support for Warren's letter will amplify the pressure on the OCC to further limit banks' crypto aspirations. (Banks, meanwhile, pleaded with the Biden administration this week to let them do more work with digital assets.) 

Bloomberg News

The lawmaker correspondence sent Wednesday was unchanged from the draft reported on by American Banker last week and urged current acting Comptroller Michael Hsu to revoke a total of four interpretive letters. Three of those were issued by Trump-era OCC chief counsel Jonathan Gould — Interpretive Letters 1170, 1172 and 1174 — and generally cleared banks to explore key elements of decentralized finance, including digital asset custody services and stablecoin payments. 

The lawmakers also asked Hsu to rescind Interpretive Letter 1179, a Biden-era memo written by the current OCC general counsel, Benjamin McDonough, that sought to limit the scope of the previous crypto letters, telling banks that they would need to receive approval from their regulators before diving into digital asset activity. 

Cryptocurrency

Warren urges OCC to abandon Trump-era crypto guidance

August 4, 2022 10:50 AM

According to the letter sent by Warren, Durbin, Whitehouse and Sanders, the latest guidance does not go far enough to limit crypto's entrance into the banking sector. 

"Under your watch, the OCC issued updated guidance with the aim of reining in potential risks posed by your predecessor's policies," the lawmakers said. "Yet, despite these efforts, we are concerned that the OCC has failed to properly address the shortcomings of the preceding interpretive letters and the risks associated with crypto-related banking activities, which have grown more severe in recent months." 

Representatives for the OCC did not provide a comment on Wednesday. Last week, a spokesperson for the agency said that "Acting Comptroller Hsu's efforts have helped to ensure a strong and coordinated federal regulatory approach to crypto to minimize risks to the banking system and consumers."

Hsu has also been vocal about the risks that digital assets could pose in spreading financial contagion through the banking system, arguing in a speech in June that "federal bank regulators' continued and intentional emphasis on safety and soundness and consumer protection" was at least partly responsible for a lack of volatility in the broader financial system as the crypto sector has plunged in recent months.