In a recent speech on March 11, the US Federal Deposit Insurance Corporation (FDIC) vice chair Travis Hill issued a warning about the potential consequences of poorly handled blockchain technology regulation. Hill emphasized that if regulation is not handled properly, bank clients and the US economy could miss out on significant opportunities.
During his speech at the Mercatus Centre think tank, Hill highlighted the importance of regulators providing clear direction and consistency to ensure that all types of deposits receive equal treatment. He expressed concern that the US is already at risk of falling behind in the blockchain technology space, with the FDIC sharing some of the blame.
Hill pointed out the potential benefits of blockchain technology, such as real-time settlement through the tokenization of bank deposits and other real-world assets. This could enable faster financial transactions, programmable payments, and improved settlement times for various operations like bond issuances.
However, Hill also raised concerns about unanswered questions surrounding tokenization, such as unified ledgers, blockchain interoperability, and ownership rights as assets move along the blockchain. He stressed the importance of establishing global standards to avoid ceding influence to other jurisdictions.
One of the key challenges highlighted by Hill is the need for an “off” switch to prevent potential risks associated with programmability, such as facilitating quick asset transfers that could lead to bank runs. He called for regulators to provide clear guidance and consistency to ensure that all types of deposits are treated equally.
Hill criticized the FDIC’s current rules, which he described as onerous and unfairly imposed on institutions engaging in blockchain transactions. He also opposed the SEC’s Staff Accounting Bulletin 121, which treats cryptocurrency holdings differently from other assets, including tokenized real-world assets.
In light of these concerns, Hill’s speech serves as a call to action for regulators to address the challenges and opportunities presented by blockchain technology. Failure to do so could have significant implications for bank clients and the US economy.
