August 10, 2022

Senators Warren, Durbin, Whitehouse, and Sanders Ask OCC to Rescind and Replace Cryptocurrency Guidance

“The interpretive letters issued under your predecessor essentially granted banks unfettered opportunity to engage in certain crypto activities and remain problematic”

Text of Letter (PDF)

Washington D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.), and Bernie Sanders (I-Vt.) sent a letter to the Office of the Comptroller of the Currency (OCC) requesting that Acting Comptroller of the Currency, Michael Hsu, rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators. The lawmakers also asked for details regarding the extent to which banks are currently engaging in crypto-related activities. 

“In light of recent turmoil in the crypto market, we are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk, and ask that you withdraw existing interpretive letters that have permitted banks to engage in certain crypto-related activities,” wrote the lawmakers. 

Under the previous acting comptroller, Brian Brooks, the OCC issued a number of interpretive letters related to cryptocurrency which determined that banks were authorized to engage in certain crypto-related activities, including: providing cryptocurrency custody service for customers, holding deposits that serve as reserves for certain stablecoins, and using independent node verification networks (INVNs) and stablecoins for payment activities. 

Despite expressing concerns “that these initiatives were not done in full coordination with all stakeholders” or as “part of a broader strategy related to the regulatory perimeter,” Acting Comptroller Hsu affirmed those initiatives in follow-up guidance issued under his leadership in November of last year, provided that banks demonstrate their ability to engage in the permitted crypto-related activities in a safe and sound manner.

In the letter, the lawmakers argue that the guidance issued under Acting Comptroller Hsu “failed to properly address the risks associated with crypto-related banking activities and the shortcomings of the preceding interpretive letters,” which they say granted banks essentially “unfettered opportunity to engage in certain crypto activities and remain problematic.” The lawmakers are calling for the OCC to rescind all previously issued crypto-related guidance, replace the guidance with a comprehensive approach in coordination with other prudential regulators, and provide answers on a series of questions by August 23, 2022.

In July 2022, Senator Warren sent a letter with Senators Whitehouse (D-R.I.), Markey (D-Mass.) and Merkley (D-Ore.) and Representatives Huffman (D-Calif.) and Tlaib (D-Mich.) to the Department of Energy and Environmental Protection Agency highlighting findings from their investigation into the environmental impacts of cryptomining and requesting that the EPA and DOE work together to require cryptominers to report their emissions and energy use. Earlier this year, the senator also sent a letter with Senators Warner (D- Va.), Brown (D-Ohio), and Reed (D-R.I.) to the Treasury Department regarding the potential use of cryptocurrency to evade sanctions, which have become even more urgent amid the sanctions imposed on Russia after their invasion of Ukraine. In July of last year, Senator Warren sent a letter to the Securities and Exchange Commission (SEC) Chair Gary Gensler requesting information about the agency's authority to regulate cryptocurrency exchanges and protect consumers from risks posed by the highly volatile cryptocurrency market.