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US Lags China In Crypto Regulation As Musk’s Tweets Roil Markets Again

US Lags China In Crypto Regulation As Musk’s Tweets Roil Markets Again

May 20, 2021 at 03:34PM
by PYMNTS

Let’s say it was a busy day for cryptos — a volatile day, a red letter day, one that spotlighted just how fluid the environment and sentiment surrounding cryptos can be.

In a sign that the regulatory landscape may be heating up, commentary during the House Financial Services Committee Hearing on Capitol Hill on Wednesday (May 19) revealed that the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve may coordinate efforts to set up an “interagency policy sprint team” to look into crypto.

That was the assessment of acting OCC Comptroller Michael Hsu, who said that such a setup was in the discussion stages, per Yahoo Finance. And at least some of the focus of that team would be on discussing the legal definitions of what crypto is, and what it does.

We note that the joint efforts described above echo some of the inter-agency statements and efforts we’ve seen emanating from China where, earlier this week, regulators responsible for banking, internet and payments services effectively banned crypto-related activities.

And, separately this week, in a letter to the OCC, Sen. Sherrod Brown (D- Ohio), who chairs the Senate Banking Committee, stated that he remained “concerned about a number of national trust charters granted by the prior leadership of the OCC.” He noted that shortly after former Acting Comptroller Brian Brooks left the OCC to join crypto exchange Binance, “several nontraditional firms that specialize in digital and cryptocurrency activities — including Paxos, Protego, and Anchorage — received conditional national trust charters from the OCC.”

Brown said in the letter that these firms “seek to broaden access to cryptocurrencies and other risky and unproven digital assets and emerging technologies to traditional bank customers.”

Though these crypto companies might hold up their OCC charters as proof that their business models are safe, said Brown, “the fact is, given the many uncertainties present in the digital asset landscape as identified by other regulators, the volatility of digital asset valuations, and the disproportionate influence individuals can have on entire cryptocurrency markets, the OCC is not in a position to regulate these entities comparably to traditional banks.”

A Red Letter Day  

The letter was marked May 19 and the OCC hearing took place on May 19, too — the very same day that cryptos were in free-fall, when bitcoin was down more than 20 percent and joke coin Dogecoin was off more than 30 percent. At one point, bitcoin was trading at around $32,000, down 50 percent from recent highs. This morning, May 20, bitcoin was trading at more than $41,000. Elon Musk taketh away and Elon Musk giveth back, it seems.

You may recall that the swoon came in part as the Tesla head said the firm would not take bitcoin for payments. A single tweet from him yesterday — with a diamond hands emoji, implying that Tesla would be hanging onto its bitcoin holdings — has helped sparked a rebound.

There’s an interesting bifurcation at work here. Hanging onto bitcoin as an asset in a corporate portfolio — Tesla has about $1.5 billion in bitcoin on its balance sheet — is not the same thing as embracing its use as currency.

We’re in the midst of a period when the ASS Coin (yep — it’s shorthand for Australian Safe Shepherd) is created and traded, and as Bloomberg reported, stands as just one of thousands of coins that have materialized out of thin air, minted, it seems on a whim. As one source/trader told Bloomberg: “I had an epiphany. I realized the money was, in fact, in the garbage late-night coins you would never consider hooking up with unless you were half in the bag.’’

It all might seem a game until the prices whipsaw and tumble, and you get your, ahem, ASS Coins handed to you.

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