Travis Hill, vice chairman of the FDIC, recently spoke out against U.S. banking restrictions on handling digital assets for clients. He emphasized the importance of a proactive approach to blockchain technology, stating that current regulatory stances are hindering innovation in the industry.

Hill highlighted the need for clarity in policies regarding permissible actions and safety standards. As a former Republican Senate staffer, he acknowledged the challenges in policy-making due to the rapid evolution of technology.

In 2022, top U.S. bank regulators, including the FDIC, Federal Reserve, and Office of the Comptroller of the Currency, issued warnings to banks about the risks associated with cryptocurrencies, particularly volatility. These agencies emphasized the importance of mitigating risks that could impact the banking system.

“The confidential nature of the existing process means there is little public information on what types of activities the FDIC might be open to, if any,” Hill said.

Hill also criticized the FDIC’s reluctance to collaborate with industry entities interested in exploring blockchain or distributed ledger technologies beyond cryptocurrency, such as tokenized deposits.

He called for more precise distinctions between crypto assets and tokenization, highlighting the importance of understanding digital representations of physical assets using blockchain technology.

Additionally, Hill commented on the SEC’s guidance that requires firms to treat crypto assets as liabilities on balance sheets, deviating from traditional custodian accounting practices. This guidance, known as Staff Accounting Bulletin No. 121, has faced criticism from the banking sector for increasing costs and limiting the expansion of digital asset services for customers.

As the debate on digital assets continues, it is essential for regulators and industry players to collaborate and find common ground to foster innovation while maintaining safety and soundness in the financial sector.

For more updates and insights on the latest developments in the cryptocurrency space, stay tuned to Global Crypto News.

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