The government has ramped up its regulatory war against blockchain-related businesses and applications, spurred by the economic and political fallout from the implosion of crypto exchange FTX in November. The crackdown began, justifiably, by targeting crypto-related scams and abuses of technology like dodgy trading of nonfungible tokens, according to a Wall Street Journal commentary. More recently, however, the Federal Reserve and the Office of the Comptroller of the Currency have taken a broader approach, slamming the brakes on any bank innovation that might destabilize the financial ecosystem. Last month, the Fed notified Federal Deposit Insurance Corp.-insured banks that it is stepping up supervision of “novel activities related to crypto-assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with nonbanks to deliver financial services to customers.” By conflating crypto currency and blockchain, regulators risk stifling innovation and pushing the U.S. further behind in the global digital economy, according to the commentary. Blockchain is record-keeping technology for the countless encrypted transactions that happen daily. Blockchains are designed to be immutable ledgers and are used widely by banks for routine business. Ordinary blockchain-based applications aren’t novel or speculative. The Fed’s new program would simply create more rules for the partnerships between banks and their technology providers. Blockchain applications enable record-keeping in healthcare and a host of services in banking, real estate, supply-chain management and other industries. The Fed’s Automated Clearing House, which processes all electronic transactions, doesn’t operate on weekends. That leaves most businesses — or those open on weekends — vulnerable to time delays and well-documented fraud risks, in the hours or days before their transactions are completed. By contrast, with blockchain services, a business needing a replacement part can pay a supplier at any hour, 365 days a year. Companies also can track every step of a product’s supply chain to meet new regulatory requirements. Participants simply create transaction instructions on the blockchain, automating the process and eliminating time delays. The resulting productivity strengthens the U.S. economy. Read more. (Subscription required.)
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
