Acting Comptroller of the Currency Michael J. Hsu underscored the need to "modernize the regulatory perimeter," by subjecting FinTech and crypto firms that offer banking services to the banking regulatory framework.

In remarks before the Federal Reserve Bank of Philadelphia's Fifth Annual FinTech Conference, Mr. Hsu raised concerns regarding whether (i) there is a point at which FinTech and crypto firms' operations can be considered akin to those of banks, (ii) the risks associated with such firms' operations are the same as the risks associated with banking, (iii) it is appropriate to regulate such firms under the bank regulatory framework, and (iv) bank regulators and the bank regulatory framework should adapt to such firms' operations.

Mr. Hsu stated that one of the primary issues that regulators must resolve is the growth of synthetic banking, whereby FinTech firms offer the "three legs of banking" - accepting deposits, issuing loans and facilitating payments - without being subject to the bank regulatory framework. Mr. Hsu also emphasized that the partnerships between banks and FinTech firms should be evaluated and the regulators should determine what is acceptable. He also noted it is often difficult for customers to tell the difference between the FinTech firm and the bank partner.

Mr. Hsu also questioned the lack of "comprehensive consolidated supervision" for crypto firms. Mr. Hsu expressed concern that the industry would become subject to consolidated supervision only after a crisis, as was the case after the 1991 closure of the Bank of Credit and Commerce International and the 2008 financial crisis. Mr. Hsu urged regulators to take proactive action by assessing now (i) how to categorize different crypto activities for regulatory purposes and (ii) what constitutes comprehensive, consolidated supervision and the best approach for such supervision. Mr. Hsu stated that being effective requires regulators to collaborate and to "learn to interact differently and define success differently."

Mr. Hsu stated that the OCC will soon offer "clarity on the recently concluded review of crypto-related interpretive letters."