The well-worn path from public service to private profit has claimed another high-profile traveler, raising profound questions about the integrity of the nation’s financial oversight at a moment of unprecedented technological disruption. Michael J. Hsu, who for nearly the entire Biden administration served as the Acting Comptroller of the Currency, has seamlessly transitioned from one of the country’s top bank supervisors to a venture partner at a firm backing some of the most controversial players in fintech and cryptocurrency. This move is not merely an ethical gray area; it represents a clear and present danger to a financial system already grappling with instability, as speculative, high-risk digital products become increasingly interwoven with the traditional banking sector that safeguards the wealth of ordinary Americans. The revolving door between Washington and Wall Street has always spun, but Hsu’s exit sends a particularly alarming signal that the lines between regulation and exploitation are becoming perilously blurred.
A System on the Brink
The timing of this transition could not be more precarious, as it unfolds against a backdrop of weakened regulatory resolve across key financial agencies. The Office of the Comptroller of the Currency (OCC), alongside the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, faces mounting criticism for a perceived decline in its supervisory power. This erosion of oversight is happening just as significant threats to financial stability are emerging from multiple fronts, including potential asset bubbles in the technology and private-lending sectors. However, the most acute danger lies in the methodical and deliberate exposure of the conventional banking system to the highly speculative world of cryptocurrencies. Rather than containing this risk, regulators appear to be actively facilitating it. The OCC, the very agency Hsu led, has been at the forefront of this integration, granting a series of federal bank trust charters to crypto-focused firms, effectively building a government-sanctioned bridge from the volatile digital asset market to the core of the U.S. financial infrastructure.
This campaign to legitimize and integrate crypto into mainstream banking has accelerated dramatically, representing a significant policy shift with far-reaching implications. Following the initial charter granted to Anchorage Digital, the OCC has extended its approval to at least five other major crypto entities: Circle, Paxos, Ripple, BitGo, and Fidelity Digital Assets. The pipeline is reportedly growing, with applications from industry behemoths like PayPal and Coinbase under consideration. Each charter granted chips away at the wall separating insured deposits and traditional credit from the high-stakes, unregulated casino of digital currencies. This process creates a direct conduit for potential contagion, where a collapse in the crypto market could trigger a catastrophic domino effect throughout the national banking system. The decision to embed these firms within the trusted framework of federal banking is a high-risk gamble, one made all the more unsettling by the departure of a top regulator to a company that profits directly from this very trend.
Unmasking the Venture Capitalist
At the center of this controversy is Michael J. Hsu, a consummate Washington insider who has built a career on his reputation as a “career public servant and a bank supervisor.” His resume is a testament to his deep entrenchment in the financial regulatory landscape, with over two decades of service spanning senior roles at the Federal Reserve Board, the Securities and Exchange Commission (SEC), the Treasury Department, and the International Monetary Fund. His tenure culminated in his May 2021 appointment to lead the OCC, where he was entrusted with ensuring the safety and soundness of the nation’s banks. Yet, after years of public service, Hsu has pivoted to the private sector, joining Core Innovation Capital (CIC) as a venture partner. This move places him in the employ of a firm that is not just a passive investor but an active promoter of the disruptive and often predatory fintech and crypto industries he was previously tasked with policing, raising immediate and unavoidable questions about conflicts of interest.
Core Innovation Capital cultivates a carefully polished image of social responsibility, branding itself as a backer of “mission driven companies” that are working to democratize finance for the underserved. The firm’s founder and regulatory partner often speak in the progressive language of financial inclusion, suggesting their goal is to leverage technology to “make the world a better place.” This public-facing narrative, however, conceals a far more troubling reality. An examination of CIC’s investment portfolio reveals that this veneer of social consciousness is a façade for a collection of companies engaged in practices that exploit consumers, charge exorbitant fees, and operate in legally dubious territory. The firm’s “mission,” it appears, is less about empowering the vulnerable and more about profiting from their financial precarity through business models that regulators in a more robust era would have swiftly shut down. Hsu’s decision to lend his credibility and expertise to such an enterprise undermines his entire legacy of public service.
A Portfolio of Predators
The disconnect between CIC’s professed mission and its actual investments is starkly illustrated by the companies it champions. The firm is a key backer of Brigit, an app that was sued by the Federal Trade Commission (FTC) under the Biden administration for a litany of consumer abuses, including deceptive advertising, levying hidden junk fees, and trapping users in a subscription model that was deliberately difficult to cancel. CIC is also a major investor in Ripple, a prominent crypto firm sued by the SEC in 2020 for alleged violations of securities law. Poetically, Ripple received its coveted OCC bank trust charter just one day after Hsu’s move to its investor, CIC, was made public. This timing highlights the deeply intertwined nature of regulation and private interest, especially considering reports that a second-term Trump administration attempted to ease enforcement against the company after it donated nearly $5 million to the presidential inauguration. The pattern of investing in legally challenged entities continues throughout CIC’s portfolio, painting a picture of a firm that prioritizes profit over ethical conduct.
Further examples solidify this pattern of predatory investment. CIC’s portfolio includes Klover, a firm currently facing a class-action lawsuit in Pennsylvania for allegedly charging interest rates as high as 1,000 percent on its cash advance products, a figure that grotesquely exceeds the state’s legal limit of 6 percent. Another one of its investments, Jiko, was formally cited by the Federal Reserve in 2024 for “significant deficiencies” in critical operational areas such as capital planning, liquidity, and strategic planning. Jiko is also noteworthy for its role in initiating what has been termed the “crypto and fintech instability invasion” when it purchased a traditional national bank in 2020. This move was enabled by a broader pro-crypto push under a previous Comptroller, Brian Brooks, who weakened the requirements for bank trust charters. By joining a firm that actively finances companies accused of usury, consumer deception, and regulatory non-compliance, a former top regulator has implicitly endorsed these practices.
A Betrayal of Public Trust
Michael J. Hsu’s move was a textbook example of the revolving door at its most corrosive. A former top regulator joining a firm that profits from the very industry he oversaw represented a profound betrayal of the public trust he was sworn to uphold. He provided his new employer with invaluable assets: deep institutional knowledge of his former agency, established personal relationships with career staff that could lead to preferential treatment, and an expert understanding of how to navigate or exploit regulatory loopholes. This dynamic, at a minimum, created an appearance of impropriety and, at worst, represented a form of straightforward corruption that degraded faith in the institutions designed to protect consumers. His decision was particularly awful because of its timing, as the convergence of crypto and fintech with the traditional financial sector—which holds Americans’ retirement savings, mortgages, and personal loans—created unprecedented systemic risk. His choice to cash in with a firm promoting these financial products stood in stark contrast to more aggressive regulators like Lina Khan and Jonathan Kanter, who were unlikely to receive similar lucrative offers from the industries they policed. Ultimately, as experts warned that a major financial collapse caused by cryptocurrency was a matter of when, not if, a key official had chosen to leverage his experience for personal profit from the very industry that posed the threat.
