Top banking regulator compares crypto to tools that sparked the financial crisis while lobbyists decry 'overly conservative' approach

• On Tuesday, Michael Hsu, who heads the Office of the Comptroller of the Currency, compared crypto's trajectory to that of credit default swaps.
• Hsu's critical remarks came just days after the Financial Times reported on a letter sent by top crypto lobbyists to the Basel Committee.
• The stringency of regulation is emerging as the top issue for the crypto industry.

A top banking regulator said on Tuesday that crypto and decentralized finance look similar to the financial instruments that sparked the 2008 financial crisis just days after crypto lobbyists complained about punitive regulation.

Michael Hsu, who heads the Office of the Comptroller of the Currency, compared crypto's trajectory to that of credit default swaps, the notorious tools that sank markets in 2008, according to Bloomberg.

"Crypto/DeFi today is on a path that looks similar to CDS in the early 2000s," Hsu told a blockchain panel on Tuesday. "Fortunately, this group has the power to change paths and avoid a crisis."

Hsu's critical remarks came just days after the Financial Times reported on a letter sent by top crypto lobbyists to the Basel Committee, which sets global standards for bank regulation.

The Basel Committee's crypto regulation proposals - requiring banks to hold $1 against each dollar of crypto holdings - were "so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto-asset markets," the lobbyists wrote.

The stringency of regulation is emerging as the top issue for the crypto industry. In response, firms have hired armies of former regulators to exert maximum influence on fast-changing policymaking.

But the crypto industry still faces the push and pull of regulators' varied opinions. Case in point: Hsu took over the OCC, which oversees federal and foreign banks, from Brian Brooks, a more crypto-friendly regulator who went on to a brief stint as CEO of Binance.

"Crypto/DeFi solutions to problems in the real economy are rare," Hsu said on Tuesday.