Michelle Bowman, member of the Board of Governors of the U.S. Federal Reserve System, has criticized the absence of a clear regulatory framework for novel technologies in the United States.
During a speech at the Salzburg Global Seminar on bank regulation and supervision, Bowman called for attention from global regulators to the current supervision of novel banking activities, in particular banking as a service and digital assets. According to Bowman, financial institutions have been left in a “supervisory void” in terms of emerging technologies.
“While there have been some efforts to provide guidance, there remains substantial uncertainty about the permissibility of and supervisory expectations for these activities […]. This leaves banks in the perilous position of relying on general but non-binding statements by policymakers only to be criticized at some point in the future,” said Bowman, whose term at the Fed ends in 2034.
Speech by Governor Bowman on bank regulation and supervision: https://t.co/LzwsKieEcx
— Federal Reserve (@federalreserve) June 25, 2023
Moreover, the governor spoke of the risks posed by the current regulatory state, noting that without a clear regulatory framework, regulators may impose new requirements on businesses after significant investments have been made. “If our role is effective supervision and regulation, we must be willing to engage in both the novel and traditional activities,” she added.
Bowman joins dozens of other voices for a clear regulatory framework for digital assets. Ratings agency Moody’s warned on June 20 that investors and companies could turn to other crypto-friendly jurisdictions without support from U.S. lawmakers for legislation focused on digital assets.
Lawmakers with the House Financial Services Committee and House Agriculture Committee have recently released a draft discussion offering certain crypto assets a pathway to being labeled digital commodities. The draft bill would prohibit the U.S. Securities and Exchange Commission (SEC) from denying digital asset trading platforms registration as a regulated alternative trading system and would allow such firms to offer “digital commodities and payment stablecoins.”
Failure to provide a clear approach for financial institutions on novel technologies “could have significant consequences for banks navigating higher interest rates,” Bowman warned.