Cuba Central Bank Should Consider Comments By Chairman Of SEC, Acting Chief Of Comptroller Of The Currency, China Central Bank, Relating To Encouraging Cryptocurrency Transactions
/The Wall Street Journal
New York, New York
21 September 2021
SEC’s Gensler Doesn’t See Cryptocurrencies Lasting Long
Regulator says history of ‘wildcat banking’ in U.S. shows limited viability for private forms of money
SEC Chair Gary Gensler likened the thousands of cryptocurrencies in existence to the so-called wildcat banking era that took hold in the U.S. from 1837 until 1863.
WASHINGTON—Securities and Exchange Commission Chair Gary Gensler said Tuesday he doesn’t see much long-term viability for cryptocurrencies, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight.
Mr. Gensler likened the thousands of cryptocurrencies in existence to the so-called wildcat banking era that took hold in the U.S. from 1837 until 1863 in the absence of federal bank regulation. Before President Abraham Lincoln created the Office of the Comptroller of the Currency, banks issued their own currencies, which they sometimes refused to redeem for their purported value in gold or silver.
“I don’t think there’s long-term viability for five or six thousand private forms of money,” Mr. Gensler said in a virtual event hosted by the Washington Post. “So in the meantime I think it’s worthwhile to have an investor-protection regime placed around this.”
Mr. Gensler, who took office in April, previously taught a class on cryptocurrency at the Massachusetts Institute of Technology, raising hopes among some industry participants that he would be a friendly regulator. Instead, he has repeatedly likened the crypto market to the Wild West, and urged crypto trading and lending platforms to register with the SEC, saying they are likely offering unregistered securities in violation of federal law.
On Tuesday he took aim at stablecoins, a fast-growing segment of the crypto market that has attracted increased scrutiny from regulators in recent months. These tokens—including Tether, USD Coin and Binance USD—are pegged at a one-to-one ratio to the dollar and say they are backed by high-quality assets. They are used primarily to trade other cryptocurrencies.
“We’ve got a lot of casinos here in the Wild West, and the poker chip is these stablecoins at the casino gaming tables,” Mr. Gensler said. He said stablecoins often have aspects of both SEC-regulated investment contracts and banking products but that federal bank regulators don’t have all the authorities they need to supervise them.
In separate remarks Tuesday, Acting Comptroller of the Currency Michael Hsu said Tuesday the crypto industry is on a path that resembles that of credit derivatives ahead of the 2008 financial crisis. He expressed doubt that cryptocurrency is achieving its goal of promoting financial inclusion and criticized crypto instruments that promise steady yields to investors for failing to explain how those returns are generated.
“I have seen one fool’s gold rush from up close in the lead-up to the 2008 financial crisis,” Mr. Hsu said in remarks to the Blockchain Association, a crypto lobbying group. “It feels like we may be on the cusp of another with cryptocurrencies and decentralized finance.”
Bloomberg
New York, New York
21 September 2021
Crypto Equated to Toxic Pre-Crisis Swaps by Banking Watchdog
By Jesse Hamilton
(Bloomberg) -- The U.S. agency that had once been the great hope of the cryptocurrency world is now issuing strong warnings to the industry that it’s in danger of echoing the toxic culture before the 2008 financial crisis.
Michael Hsu, the acting chief of the Office of the Comptroller of the Currency, argued Tuesday that cryptocurrencies and decentralized finance may be evolving into threats to the financial system in much the same way certain derivatives brought it near collapse more than a decade ago. Notorious credit default swaps were engineered by math wizards in much the same way crypto has emerged, he said.
“Crypto/DeFi today is on a path that looks similar to CDS in the early 2000’s,” Hsu told the Blockchain Association in a webcast. “Fortunately, this group has the power to change paths and avoid a crisis.”
OCC had previously been run by a former Coinbase Global Inc. executive, Brian P. Brooks, who led a pro-crypto charge to establish policies more welcoming to the industry and to provide some of the firms banking charters. When he was installed at the OCC by Treasury Secretary Janet Yellen, Hsu put its crypto-friendly policies on hold and has been among regulators calling for a new, unified approach across agencies.
Hsu -- adopting a skeptical tone similar to Securities and Exchange Commission Chairman Gary Gensler’s -- said he is troubled by the industry’s high-yield savings products, and asked, “How are the returns generated? It is hard to get straight answers that don’t quickly devolve into cryptospeak.”
“Crypto/DeFi solutions to problems in the real economy are rare,” Hsu said. He also said a reckoning could be on the way in which the “hardcore believers in the technology” give way to mainstream users who aren’t as eager to forgive the riskiness of the products. Those people will “dominate and drive reactions,” which he suggested could mean more danger of panics that unravel crypto investments and threaten firms that run into trouble. Hsu has been involved in talks at the President’s Working Group on Financial Markets about what the government should do about stablecoins -- a key segment of digital currencies, including the popular Tether token.
The Hill
Washington DC
22 September 2021
Biden to tap law professor who wants to 'end banking as we know it' as OCC chief: reports
By Joseph Choi
President Biden is reportedly planning to nominate a law professor who has said she wants to “end banking as we know it" to run the Office of the Comptroller of the Currency (OCC). Sources told Bloomberg and The Wall Street Journal that Biden is planning to nominate Cornell Law School professor Saule Omarova to run the OCC, which oversees and regulates the U.S. banking system.
Omarova specializes in banking law, international finance and corporate finance. She has received degrees from Moscow State University, the University of Wisconsin at Madison and Northwestern University School of Law. Omarova, who was born in Kazakhstan, previously served as a special adviser on regulatory policy under former President George W. Bush. In her writings, she has been critical of large banks entering the world of cryptocurrencies, which she argued would allow large firms to conduct trading activity out of sight from federal regulators.
As the OCC oversees major banking institutions such as JPMorgan Chase, Citigroup and Bank of America, Omarova's stance on expanding governance over large banks may signal a potentially a different relationship between banks and the federal government.
The Wall Street Journal
New York, New York
22 September 2021
WASHINGTON—President Biden plans to nominate a law professor who has criticized Wall Street banks to oversee some of the largest U.S. lenders, people familiar with the matter said. Bloomberg News reported earlier on the expected nomination.
The OCC is an independent bureau of the Treasury Department. It oversees about 1,200 banks with total assets of $14 trillion, some two-thirds of the total in the U.S. banking system, making it one of the most powerful regulators alongside the Fed and the Federal Deposit Insurance Corp.
The powerful Comptroller of the Currency has a seat on the board of the FDIC as well as on the Financial Stability Oversight Council, a panel of senior regulators charged with detecting risks to the financial system. The bulk of the job revolves around supervising the day-to-day operations of the world’s largest banks. A native of Kazakhstan, if confirmed Ms. Omarova would be the first woman to serve as the full-time comptroller to run the 3,500-strong agency since Abraham Lincoln signed it into law in 1863.
ThomsonReuters
London, United Kingdom
24 September 2021
SHANGHAI, Sept 24 (Reuters) - China intensified a crackdown on cryptocurrency trading on Friday, vowing to root out "illegal" activity and banning crypto mining nationwide, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.
Ten Chinese government agencies, including the central bank as well as banking, securities and foreign exchange regulators, said in a joint statement they would work closely to maintain a "high-pressure" clampdown on trading of cryptocurrencies.
The People's Bank of China (PBOC) said cryptocurrencies must not circulate in markets as traditional currencies and that overseas exchanges are barred from providing services to mainland investors via the internet. The PBOC also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading.
The moves come after China's State Council, or cabinet, vowed in May to crack down on bitcoin mining and trading as part of efforts to fend off financial risk, sparking a major sell-off of cryptocurrencies. The Chinese government will "resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people's properties and maintain economic, financial and social order," the PBOC said in a statement on its website.
In response to the latest move, bitcoin , the world's largest cryptocurrency, dropped over 6% to $42,2167, having earlier been down about 1%. Smaller coins, which typically rise and fall in tandem with bitcoin, also tumbled. Ether fell 10% while XRP a similar amount. "There's a degree of panic in the air," said Joseph Edwards, head of research at cryptocurrency broker Enigma Securities in London. "Crypto continues to exist in a grey area of legality across the board in China."
The move also hit cryptocurrency and blockchain-related shares. U.S.-listed miners Riot Blockchain (RIOT.O), Marathon Digital (MARA.O) and Bit Digital (BTBT.O) slipping between 6.3% and 7.5% in premarket trading. China-focused SOS dropped 6.1% while San Francisco crypto exchange Coinbase Global (COIN.O) fell 3.4%.
"THOROUGH CLEANUP"
The National Development and Reform Commission (NDRC) said it was launching a thorough, nationwide cleanup of cryptocurrency mining. Such activities contribute little to China's economic growth, spawn risks, consume a huge amount of energy and hamper carbon neutrality goals, it said. It's an "imperative" to wipe out cryptocurrency mining, a task key to promoting high-quality growth of China's economy, the NDRC said in a notice to local governments.
Virtual currency mining had been a big business in China before a crackdown that started earlier this year, accounting for more than half of the world's crypto supply. The NDRC said it will work closely with other government agencies to make sure financial support and electricity supply will be cut off for mining. The national planning body also urged local governments to come up with a specific timetable and road map to eradicate such activities.
Previous restrictions, issued by local governments, paralysed the industry as miners dumped machines in despair or sought refuge in places such as Texas or Kazakhstan.
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