Robust Bank Regulation Offers Model for Administration’s Digital Asset Priorities

Washington, D.C. – The Bank Policy Institute and the American Bankers Association filed a comment today with the White House Office of Science and Technology Policy in response to its effort to establish digital asset research and development priorities. This request for input continues the Administration’s “whole of government” approach to fostering responsible innovation, as outlined in recent Executive Orders.

“Banks continue to lead the way in responsible innovation in the financial services sector while nonbank crypto firms continue to collapse,” stated the Associations. “The rules and regulations designed to preserve financial stability and protect customers and investors, coupled with effective risk management capabilities, help ensure that banks are well-equipped to manage any risks associated with using novel technologies.”

The letter calls on policymakers to distinguish among digital assets, cryptocurrencies, and tokenized assets, as well as the underlying distributed ledger technology and blockchain infrastructure, which may differ in use across functions and activities. It also encourages the Administration to acknowledge existing innovations underway at America’s banks and the rules and safeguards already in place that allow banks to innovate safely.

The letter specifically recommends the following:

  1. Clearly define products and underlying technologies. Traditional bank products or services using distributed ledger technology (DLT) or blockchain are often categorized into a single group and are treated the same as nonbank-issued cryptocurrencies, which present very different risks. Consistent terminology and standards are needed to ensure appropriate risk management while not stifling responsible innovation.
  2. Acknowledge banks’ ability to manage digital asset risks. The banking regulators have given some indication that they view the risks presented by banks’ use of DLT and blockchain as akin to those presented by nonbank-issued cryptoassets. Policymakers should study how banks are able to appropriately manage the risks presented by permissioned DLT, blockchain or other novel technologies in connection with traditional banking products and for internal recordkeeping.
  3. Continue research to combat illicit finance risk. Policymakers should study how best to recognize and take actions to mitigate illicit finance risks associated with certain digital-asset transactions, including how new technologies could help mitigate financial crime.
  4. Research opportunities to advance responsible innovation. Policymakers should research how new technologies can facilitate the creation of verifiable credentials, identify specific cybersecurity standards or approaches for interacting with permissionless/public blockchains and examine interoperability blockchain standards for banks.

To access a copy of the letter, please click here.


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

About American Bankers Association.

The American Bankers Association is the voice of the nation’s $23.6 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.2 trillion in deposits and extend $12.2 trillion in loans.

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