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OCC’s Hsu: Bank-fintech partnerships ‘here to stay’, while crypto takes up ‘brain space’

Michael Hsu, the currency’s deputy controller, said policymakers may be spending too much time on crypto.

A leading US banking regulator said its caution about banks collaborating with fintechs is not intended to stifle those arrangements, but rather reflects its concern that companies need to properly assess their risks.

Michael Hsu, the Acting Comptroller of the Currency, also told Reuters in an interview that policymakers may be spending too much time and energy thinking about cryptocurrency at the expense of figuring out the best way to control other types of financial technology.

“Look, banking-fintech partnerships, they’re here to stay. I’m not trying to get rid of them,” Hsu said on Wednesday. “This is the future, so let’s do the future right.”


In comments last month that raised eyebrows in financial services, Hsu said the Office of the Comptroller of the Currency had observed that partnerships between banks and fintechs were growing at “exponential rates” and becoming increasingly complex.

“My strong feeling is that this process, if left to its own devices, is likely to accelerate and expand until there is a serious problem or even a crisis,” Hsu said at the time.

House Republicans criticized Hsu’s comments in a letter sent to the head of the OCC on Tuesday, claiming that the technological innovation enabled by bank-fintech partnerships has enabled banks to reach out to underserved customers.

Hsu explained on Wednesday that his concern over banks and fintechs joining forces is the possibility that responsibilities for monitoring risk could be clouded when multiple companies, sometimes with different incentives, share responsibilities.

“When everything is arranged within a bank, we know exactly who is responsible if something breaks,” he says. “If you break these things down… and the business models are different, then the risk can be lost.”

Hsu said the appropriate regulatory approach for fintech partnerships remains unclear as agencies work to address the various issues at stake and then determine which authorities to use.


On the cryptocurrency side, Hsu said he was concerned about policymakers in Congress and regulators overburdening themselves at the expense of other areas.

“We spend too much time on crypto,” he said. “It’s interesting, it has thorny issues… but compared to other technology and banking issues, I think we’re kind of overweight crypto now.”

The meteoric rise of crypto and related products such as stablecoins has attracted the attention of numerous government agencies, including the OCC, the Securities and Exchange Commission and the Treasury Department, and has even been the focus of an executive order issued by President Joe Biden.

In Congress, lawmakers are juggling multiple measures to establish some sort of regulatory framework for cryptocurrency.

But Hsu warned that with so many policymakers focusing on this one facet of emerging financial technology issues, others more relevant to banks may be neglected.

“Crypto just takes up a lot of brain space for an awful lot of people, both on [Capitol] Hill and the regulatory community,” he said. “The persistence of brain space occupation, it’s starting to worry me now that we’re not spending that time and attention on other things.”

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