The U.S. Department of Treasury's Office of the Comptroller of Currency has issued letters that allow banks to participate in digital currency transactions.
Due to the volatile nature of the digital asset market and the increasing risk that financial institutions might encounter related issues, several senators have asked the Treasury Department to update its guidance on digital asset transactions.
The Office of the Comptroller of Currency is an independent agency within the Treasury Department that oversees the activities of financial institutions. It also ensures that the country's financial system is following proper regulations. Several U.S. senators such as Elizabeth Warren of Massachusetts, Dick Durbin of Illinois, Sheldon Whitehouse of Rhode Island, and Bernie Sanders of Vermont have asked the agency to limit the number of cryptocurrency transactions financial institutions can make.
What these senators ask
In a letter to the agency, the senators noted that the recent volatility in the cryptocurrency market has raised concerns about the potential risks that financial institutions might face due to their activities. They asked the agency to withdraw its previous interpretive letters that allowed banks to participate in certain types of digital currency transactions.
"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," the letter read.
The senators also asked the agency to withdraw its previous interpretive letters allowing banks to participate in certain digital currency transactions. Letters 1170, 1172, 1174, and 1179 were issued to ensure that the transactions were conducted soundly.
These letters, issued in response to a request by the senators, allowed banks to conduct certain types of transactions in what they considered problematic and unfettered ways. They cited the volatility of the cryptocurrency market as one of the reasons for requiring more oversight.
The senators also said that the OCC has not adequately addressed the concerns about the activities of financial institutions related to cryptocurrencies. They also asked the agency to work with other regulators to develop a stronger framework for protecting consumer interests when it comes to cryptocurrencies.
Moreover, the senators demanded that the OCC provide a list of all the banks regulated by it and currently providing various services related to cryptocurrencies. They also asked for information about the total dollar amount of cryptocurrencies currently deposited by these institutions.
OCC in line to recude risk
A spokesperson for the OCC said that although it doesn't comment on the congressional correspondences, the agency has previously supported a robust federal approach to address the risks associated with the activities of financial institutions related to cryptocurrencies.
In response to a question, the spokesperson said that the agency's previous statements about encouraging banks to participate in cryptocurrencies have been interpreted to encourage such activities.
"To the extent the OCC's prior communications have been interpreted as tacit encouragement to engage in crypto activities, the forthcoming releases will clarify that safety and soundness is paramount," the spokesperson said.
The federal government is also exploring the possible regulations for the cryptocurrency market to prevent a disorderly and rapid emergence and evolution of the financial system.
Despite the various arguments that have been made against the proposed regulations, some companies in the cryptocurrency industry are still positive about the potential impact of the regulations on the industry.
Georgia Quinn, the general counsel of Anchorage Digital, said that the proposed regulations would help ensure that the industry is safer. She added that withdrawing the letters that allowed banks to participate in certain transactions would enable the company to avoid federal charters.