The crypto industry continues to resist what it sees as improper or over-burdensome regulation and oversight, while jurisdictions continue to compete for crypto business, according to Acting Comptroller of the Currency Michael J. Hsu. 

“The risk with such competition is that it gives the industry leverage and forces regulators to accommodate and compromise,” he said.

In his remarks to the Financial Stability Board (FSB)’s Crypto Working Group on February 22, he said that the FSB’s global regulatory framework for crypto-asset activities lays out recommendations to promote comprehensive and consistent regulatory and supervisory approaches. 

“But implementation has been challenging, and no real progress has been made on consolidated supervision,” he noted.

Hsu shared his perspective on the importance of coordination and collaboration on the supervision of global institutions.

“Fortunately, collaboration and coordination among financial regulators can serve as an effective mitigant to the risk of over-accommodation,” he said.

Sharing information with peer agencies and seeking a common understanding of the risks and opportunities in the space can help ensure that regulatory standards remain high, he said, adding that the FSB’s efforts in this regard have been “extremely valuable”.

In July 2023, the FSB published its global regulatory framework for crypto-asset activities to promote the comprehensiveness and international consistency of regulatory and supervisory approaches.

The framework is based on the principle of ‘same activity, same risk, same regulation’ and provides a strong basis for ensuring that crypto-asset activities and so-called stablecoins are subject to consistent and comprehensive regulation, commensurate to the risks they pose, while supporting responsible innovations potentially brought by the technological change.

It consists of two distinct sets of recommendations:

High-level recommendations for the regulation, supervision and oversight of crypto-asset activities and markets;

Revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements.

The recommendations focus on addressing risks to financial stability, and they do not comprehensively cover all specific risk categories related to crypto-asset activities.

They take account of lessons from events of the past year in crypto-asset markets, as well as feedback received during the public consultation of the FSB’s proposals.

“As students and practitioners of financial stability, we know that trust is fragile. Once lost, it is difficult to regain,” Hsu commented.

“Even though the underlying blockchain technology is supposedly trust-resistant, nearly all crypto activities operate through intermediaries, whom users must trust,” he said. 

“Put simply, there are no shortcuts, which is why the FSB principle of “same activity, same risk, same regulatory outcome” is so important as a guide to this work,” he added.