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"The recent collapse of TerraUSD stablecoin and related sales in the crypto market has shown that hype-driven growth could lead to bubbles, harm consumers, and a series of new productive markets," Hsu said in a statement Tuesday before the Digital Chamber of Commerce. .

"What is more clear to me ... that these developments are indicators of the crypto economy 's reliance on hype ... the latest crypto events should serve as a warning and an opportunity to reset and rectify the problems the industry is trying to create. Resolve," he added.

Hsu says the risks of infection within crypto are real, emphasizing that the collapse of algorithmic stablecoin Terra spreads to the largest stablecoin, Tether (USDT-USD), and the broader crypto ecosystem.

However, Hsu was encouraged that the cryptocurrency rout does not seem to be hurting traditional banks. He said the OCC's task of requiring banks to request permission to perform crypto operations has helped reduce exposure.

"There are no banks under pressure or rumors that they are under pressure due to crypto exposure," Hsu said.

A self-described critic of crypto has also warned that crypto is highly fragmented. He noted that the daily addition of new blockchains creates the need for cross-chain bridges - systems that allow the transfer of crypto currency between blockchains - exposing the system to hacks.

"It is as if instead of merging into one common railway to connect the country, the developers were encouraged to build custom rail systems from scratch," he said.

Hsu also said there was not enough clarity about how the storage works and who owns the crypto assets purchased at the trade. "Establishing clear standards for ownership and preservation of digital assets will protect consumers while enabling sustainable, long-term growth," he said.

The acting administrator is also concerned about crypto products that offer what he calls "unbearably high yields". Offering a high yield is a great way to attract investors to crypto, he noted, especially in the fixed financial space. In particular, Hsu likens crop farming - actually borrowing human crypto using smart contracts to get yields - to the Ponzi scheme.

"It seems growing to accept that today's harvest crops may be more similar to Ponzi schemes than to new productive inventions," he said.

Cowen analyst Jaret Seiberg says he thinks Hsu's comments indicate that banks will have a challenging time to participate in crypto. "Hsu argues that current crypto prices are unreliable," Seiberg said. "That means the best way to protect the banking system is to reduce its exposure to crypto."

Seiberg also said it is difficult to see the OCC issuing charts with limited purpose for financial institutions to participate in crypto as Hsu seeks to protect the banking system from crypto risks.

Source: yahoo

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