Travis Hill, the vice chair of the FDIC, has voiced his concerns about the restrictive U.S. banking regulations surrounding the handling of digital assets for clients. In a statement on Monday, Hill called for a more proactive approach to embracing blockchain technology, highlighting how current regulations are hindering innovation.
He stressed the importance of clear policies outlining permissible actions and safety standards, noting the challenges of policy-making in the face of rapidly evolving technology. In 2022, major U.S. bank regulators, including the FDIC, Federal Reserve, and Office of the Comptroller of the Currency, cautioned banks about the risks associated with cryptocurrencies, particularly their volatility. These agencies emphasized the need to safeguard the banking system from unpredictable risks.
Hill also criticized the FDIC for its apparent reluctance to collaborate with industry players interested in exploring blockchain and distributed ledger technologies beyond just cryptocurrency, such as tokenized deposits. He expressed concerns about the lack of transparency in the FDIC’s processes and the uncertainty surrounding the types of activities the agency may be open to.
Furthermore, Hill called for a clearer distinction between cryptocurrencies and tokenization, the latter referring to digital representations of physical assets often built on blockchain technology. He also commented on the SEC’s guidance requiring firms to treat crypto assets as liabilities on balance sheets, diverging from traditional custodian accounting practices. Hill argued that this guidance, specifically Staff Accounting Bulletin No. 121, is impeding banks’ ability to expand digital asset services for customers by increasing costs, leading to criticism from the banking sector since its publication in 2022.
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