"US Federal Agencies Need Virtual Currency Regulatory Coalition... Shadow Banking Crisis 'D?j? Vu'"

Acting Head of Financial Supervisory Service Mentions
Joint Discussions by Fed and Related Agencies Referenced
Concerns Over Potential Spread of Shadow Banking

[Image source=Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Michael S. Lee, Acting Comptroller of the Currency (OSC), emphasized the need for federal agencies to collaborate on cryptocurrency regulation. He also expressed concerns that cryptocurrencies could fuel shadow banking and potentially trigger a financial crisis.

In an interview with a major foreign media outlet on the 30th (local time), Acting Comptroller Lee stated that U.S. regulatory authorities must cooperate to establish regulatory boundaries. Lee said, "Coordination among agencies is truly necessary. Other agencies are also interested in coordination."

Lee also revealed that the OSC, the Federal Reserve (Fed), and the Federal Deposit Insurance Corporation (FDIC) have discussed cryptocurrency regulation together. The OCC, an agency under the Treasury Department, is responsible for bank regulation.

Lee explained that the inter-agency discussions are intended not to set immediate policy directions but to track the growth of cryptocurrencies and provide ideas to federal agencies.

Lee is widely regarded as a figure deployed by Treasury Secretary Janet Yellen, who has long been concerned about the side effects of cryptocurrencies such as tax evasion and illegal transactions. Shortly after taking office, he instructed staff to review the Trump administration’s favorable decisions regarding cryptocurrencies.

This contrasts with the previous OSC Comptroller, appointed during the Donald Trump administration, who abruptly moved to become CEO of BinanceUS, the world’s largest cryptocurrency exchange.

Securities and futures regulatory agencies have also begun discussions on cryptocurrency management. Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), disclosed at a House hearing last week that the SEC and the Commodity Futures Trading Commission (CFTC) have discussed measures to protect cryptocurrency investors. Gensler argued, "We also need investor protection mechanisms at the level provided by the New York Stock Exchange or Nasdaq markets."

Last week, Lee appeared before Congress and expressed concerns that "new and enhanced technologies could lead to a large shadow banking system with less regulation." While mentioning that various fintech companies’ services are highly anticipated, he also noted the existence of risk factors, emphasizing, "I cannot help but feel a sense of d?j? vu (regarding a crisis)."

Shadow banking refers to financial intermediaries or products that operate outside government regulation. Shadow banking has been criticized for having direct or indirect impacts on the 1997 Asian financial crisis and the 2008 global financial crisis.

Major foreign media outlets have reported that U.S. financial authorities are preparing to play an active role in regulating the cryptocurrency market, which has grown to $1.5 trillion, but they also noted that it may take considerable time before regulations are fully implemented.

This content was produced with the assistance of AI translation services.