FDIC Criticizes US Agencies for Closed Regulatory Approach
A top regulator has stated that United States regulators’ approach to digital assets and blockchain technology is counterproductive and risks allowing other economies to leapfrog the country in technology leadership.
Travis Hill, the vice chair of the U.S. Federal Deposit Insurance Corporation (FDIC), criticized his agency’s closed-off approach in a speech on Monday at George Mason University. He also denounced the Securities and Exchange Commission’s (SEC) guidance, which places a heavy burden on financial institutions engaged in digital asset activities.
Hill recognized the need for caution with new technology, but he believes that the current approach of the FDIC and its sister agencies has “significant downsides.”
This approach has created a perception that the FDIC is not open for business when it comes to blockchain or distributed ledger technology.
🚨NEW(ish): Vice Chairman of the @FDICgov says #tokenization of real world assets will have a transformative impact on the banking system. He says regulators including the @SECGov and the FDIC need to do a better job of providing clarity.
He urged regulators to differentiate between ‘crypto’ and blockchain or other distributed ledger technologies (DLT). While banks dealing in ‘crypto’ may require enhanced supervision, regulation around blockchain should be more supportive to foster innovation.
“I do not think banks interested in [blockchain], insofar as it simply represents a new way of recording ownership and transferring value, should need to go through the same gauntlet as banks interested in crypto,” he said.
Concerning ‘crypto,’ the regulator criticized the SEC’s guidance from 2022, where the agency insisted that banks treat custodied digital assets as both assets and liabilities.
Hill also praised tokenization in his speech, believing it can revolutionize the U.S. financial sector with benefits such as faster settlement times for multi-currency bond issuance and programmability to reduce the need for escrow in high-value transactions.
Blockchain-powered atomic settlement offers efficiency gains in key markets like the $7.5 trillion-a-day forex market.
Hill raised the question of whether the world will rely on a single network or if each institution will maintain its own ledger, emphasizing the importance of interoperability if the latter option is chosen.
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