Coordination amongst two monetary regulators to tackle the dangers posed by blockchain know-how has lacked consistency, a congressional watchdog stated Monday.
In a pair of precedence open suggestions, the Authorities Accountability Workplace stated the Federal Reserve and the Securities and Exchange Commission have succeeded in establishing coordination mechanisms with different federal regulators and monetary working teams to establish the dangers posed by blockchain-related services and products. However neither the Fed nor the SEC has “usually” convened these our bodies for the reason that GAO delivered its suggestion in August 2023.
Missing a cadence in convening these teams, the GAO stated, means each businesses are unable “particularly to establish the complete vary of dangers and regulatory challenges of present and rising blockchain services and products and supply a well timed response to any unaddressed dangers.”
The Fed, which neither agreed nor disagreed with the GAO’s suggestion, stated it “routinely engages with the opposite federal monetary regulators on rising dangers posed by blockchain-related services and products.” The banking regulator famous that it participates in information-sharing on figuring out blockchain dangers with different regulators within the Digital Asset Working Group, however the GAO is pushing for “planning processes for figuring out and addressing such dangers” inside that group.
“Absolutely implementing this precedence suggestion would assist the Federal Reserve and different monetary regulators collectively establish dangers posed by blockchain-related services and products and develop and implement a regulatory response in a well timed method,” the GAO acknowledged.
The SEC, in the meantime, advised the GAO that it really works to establish crypto-related dangers within the company’s work with the Monetary Stability Oversight Council, the President’s Working Group on Monetary Markets and a few worldwide our bodies. FSOC “established a coordination mechanism” via the Digital Asset Working Group, the SEC reported to the GAO, including that the working group “meets usually and has mentioned quite a lot of subjects, together with regulatory developments, rulemakings, dangers, knowledge assortment, and market developments.”
The GAO known as the Digital Asset Working Group “a optimistic step,” however prodded the SEC to embrace planning paperwork.
“Such planning paperwork may embrace (1) goals and assembly frequency; (2) processes for figuring out the complete vary of dangers and regulatory challenges regarding blockchain-related services and products (not solely these associated to monetary stability); and (3) processes for responding to those dangers and challenges inside agreed-upon timeframes,” the GAO stated.
Past blockchain, the GAO re-upped a second precedence suggestion to the Federal Reserve, which was initially delivered in 2019. The watchdog needed the Fed, together with different banking regulators and the Client Monetary Safety Bureau, to finalize “written communication that offers banks particular path on the suitable use of different knowledge within the underwriting course of when partnering with fintech lenders.”
The Fed teamed with the Federal Deposit Insurance coverage Corp. and the Workplace of the Comptroller of the Foreign money a yr in the past in issuing interagency steering on third-party threat administration, however the GAO stated that the steering falls quick on specificity.
The steering “doesn’t embrace particular path to banks that have interaction with fintech lenders on the suitable use of different knowledge within the underwriting course of,” the GAO wrote. “Fairly, the steering broadly applies to all subjects and third-party relationships. Accordingly, it doesn’t handle particular subjects, comparable to using different knowledge, or particular sorts of third-party relationships, comparable to relationships with fintech firms.”
