Bank-fintech partnerships ‘here to stay,’ while crypto hogging ‘brain space’

A prominent US bank regulator said that his caution on banks' collaborations with fintechs is not intended to hinder such relationships, but rather to express his worry that businesses must accurately assess their risks.

The acting Comptroller of the Currency, Michael Hsu, also said in an interview with Reuters that authorities could be spending too much time and effort considering cryptocurrencies rather than determining the best method to regulate other forms of financial technology.

"Look, relationships between banks and fintech are here to stay. I'm not attempting to eradicate them, Hsu said on Wednesday. "Let's make the future right; this is the future."

reliance on fintech

In comments made last month that caused a stir in the financial services sector, Hsu said that the Office of the Comptroller of the Currency has seen collaborations between banks and fintechs developing at "exponential rates" and getting more complicated.

At the time, Hsu said, "My strong impression is that this process, if left to its own devices, is likely to accelerate and grow until there is a serious issue or perhaps a catastrophe."

In a letter to the OCC chief on Tuesday, House Republicans challenged Hsu's remarks, arguing that banks have been able to reach underserved people because to technology advancement made possible by collaborations between banks and fintech companies.

Hsu clarified on Wednesday that he is concerned about the likelihood that risk monitoring obligations might get muddled when various companies, often with different objectives, share responsibilities.

We know precisely who is responsible when anything goes wrong when everything is done inside a bank, he added. "Risk may be buried when you start cutting these things apart... and the business models are different."

Hsu said that while agencies try to understand the numerous difficulties involved and then decide which powers to utilize, the correct regulatory approach to fintech collaborations remains unclear.

weighty cryptocurrency

Regarding cryptocurrencies, Hsu said he was truly concerned that regulators and politicians in Congress are overextending themselves at the expense of other sectors.

We're focusing too much on cryptocurrency, he remarked. "It's intriguing, it has difficult problems, but I believe we're presently too focused on cryptocurrency compared to other technological and financial problems."

Numerous government organizations, including the OCC, the Securities and Exchange Commission, and the Treasury Department, are paying close attention to the explosive growth of cryptocurrencies and associated products like stablecoins. President Joe Biden even issued an executive order on the subject.

Congressmen are juggling a number of bills to create a legislative framework for cryptocurrencies.

However, Hsu issued a warning that other concerns that are more important for banks can be overlooked as a result of the regulators' intense attention on one particular aspect of growing financial technology challenges.

Crypto is just taking up a lot of people's mental space, both on Capitol Hill and in the regulatory world, he said. Now that we're not focusing that time and attention on other things, the continued occupancy of our brain space worries me.