US Treasury official: Collapse of stablecoin UST ‘wake-up call’ for crypto

• The collapse of UST highlights areas where the industry needs work, the official said
• The majority of speakers agreed that regulatory clarity is needed

Cryptocurrency is becoming dangerous fast, a U.S. Treasury Department official said Tuesday.

Michael Hsu, acting director of the Office of the Comptroller of the Currency, told attendees at the DC Blockchain Summit that the consequences of stablecoin UST’s decoupling from its one-to-one relationship with the US dollar “should serve as a wake-up call and an opportunity to reset and recalibrate the problems the industry is trying to solve.”

It’s promising that there hasn’t been contagion to the banking system as a result of de-pegging, Hsu said, but this further underscores the need for safe havens outside of crypto.

“No bank is stressed or even rumored to be stressed due to crypto exposure,” Hsu said. “This stress-free environment has allowed the traditional banking system to remain a source of strength for households and businesses in recent financial market volatility.”

Yield farming — where cryptocurrency holders trade their wealth in exchange for fixed-rate returns — in the context of UST is particularly alarming, Hsu said.

“Yield farming today may have more in common with Ponzi schemes than with productive innovation,” he said. “The hype-driven economy presents real challenges for those genuinely interested in productive innovation to protect consumers.”

While Hsu’s tone was harsher than other speakers, the notion that true innovators want and need to operate within legal guidelines was widely shared.

“The priority now is… responsible innovation,” said Sulolit Mukherjee, global head of tax at crypto exchange Binance. “Good players and institutional investors are waiting for more clarity in the room.”

Hsu is also striving to clarify the guard rails in the industry.

“While I remain a crypto skeptic, I came to see its potential and understand why there is so much excitement around the industry,” he said. “The OCC will continue to tread carefully and cautiously [with] Crypto to ensure the national banking system is safe and sound.”

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• Casey Wagner

  blocks

  Elderly reporter

  Casey Wagner is a New York-based business journalist covering regulation, legislation, digital asset investment firms, market structures, central banks and governments, and CBDCs. Before joining Blockworks, she covered markets for Bloomberg News. She graduated from the University of Virginia with a degree in media studies. Contact Casey via email at [email protected]

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