Acting OCC Comptroller Identifies Financial Crisis Lessons For The Crypto Industry

In remarks before the Blockchain Association, Acting OCC Comptroller Michael Hsu identified lessons from the 2008 financial crisis that regulators and the crypto industry should apply to "avoid repeating the mistakes of the past."

Mr. Hsu warned of similarities between the trajectory of (i) the crypto and decentralized finance ("DeFi") industries and (ii) the derivatives business leading up to the 2008 financial crisis. He drew a distinction between innovation used to solve a problem and "innovation for innovation's sake," explaining that the latter lacks a clear purpose. Mr. Hsu likened the proliferation of synthetic collateralized debt obligation-squared deals and negative amortization mortgages to the creation of stablecoin savings accounts, asserting that these products lack straightforward explanations as to their function and how returns are generated. Mr. Hsu stated that most crypto/DeFi innovations do not appear to be addressing issues in the real economy.