US Banking Regulator Gets Ready for DeFi, But the Roller Coaster Continues with Acting OCC Facing Exit

The crypto community is excited and bullish on the forward-thinking leadership from the OCC. But it will take time to really come into action.


Brian Brooks, the US acting Comptroller of the Currency (OCC), gave the crypto market another reason to be excited as he wrote about Decentralized Finance (DeFi) requiring 21st-century regulation.

“This piece on DeFi from @BrianBrooksOCC is one of the most insightful takes on crypto regulation I've ever seen. Quite remarkable coming from a high-ranking official. This is the type of forward-thinking leadership we need to align financial innovation & regulation in the USA,” said Jake Chervinsky, General Counsel at Compound Finance.

In his “Get ready for self-driving banks” opinion piece on FT, Brooks noted that much like self-driving cars, banking is heading down the same road through DeFi.

DeFi, which leverages blockchain technology to deliver services with no human intermediation, is turning banking on its head, wrote Brooks, the former general counsel at Coinbase.

“A landmark moment in the regulator's attention to the burgeoning DeFi space,” one DeFi investor shared his excitement.

Bullish on DeFi Future

The DeFi technology brings new opportunities in the form of best interest rates set by algorithms, ending discrimination against certain borrowers, and eliminating the risk of fraud or corruption by no longer being run by humans at all, listed Brooks.

But he noted that at the same time, these self-driving banks present new risks such as increased liquidity risk because of accelerated equity sell-offs due to high-frequency trading, asset volatility, and loan collateral management. Moreover, Brooks argued that as happened with self-driving cars,

“in the absence of federal regulatory clarity, US states rush to fill the void and create a patchwork of inconsistent rules that impede the orderly development of a national market.”

Here, federal regulators need to determine a regulatory scheme. In fact, they can properly examine a bank that exists only as software and ensure fair treatment of customers by such a bank and that these self-driving banks are serving communities, he wrote.

Brooks even mentioned that although not yet, OCC can even grant a national bank charter to open-source software that manages deposit-taking, lending, or payments, in the future.

“I’ve never been so bullish about the future of DeFi. Another move by the OCC to embrace the new exponential digital technology” commented Jay Hao, CEO of crypto exchange OKEx on this.

This officially sent the DeFi tokens’ price higher, 5% to 35%.

It Will Take Time

“Any momentum in this direction would easily lift the valuation of all DeFi tokens by multiple x esp the blue chips,” noted one of the partners of crypto fund The Spartan Group while cautioning that such a thing won’t happen overnight.

“It will take 10-20 years, but the pie is so huge that even incremental gains have a big impact on DeFi,” he added.

The rollercoaster meanwhile continues with the rumors floating around that Brooks might leave the office within the next few days. Brooks was named Acting Comptroller last summer by President Donald Trump, but on Jan. 20, under the new Presidency, the Democratic party will be taking the Senate.

During Brooks’ term, OCC took a progressive crypto approach, with the most important being allowing crypto companies to secure national banking charters.

But he drew the ire of Congress members, six of whom wrote an open letter asking Brooks to focus on economic relief rather than crypto regulations.

However, trader and economist Alex Kruger is still bullish as he says, “uncertainty surrounding the certain creates opportunity.”

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