The appearing chief of the U.S. Workplace of the Comptroller of the Foreign money (OCC), Michael Hsu, mentioned he’s optimistic in regards to the transformative potential of tokenization however continues to be cautious of the crypto attributable to excessive ranges of threat.
Hsu made the assertion throughout a chat on the DC Fintech Week in Washington on Nov. 7.
Whereas nearly all of his time was spent speaking about banking supervision, he additionally highlighted the advantages of tokenization in streamlining the settlement of funds and securities. However, he dismissed cryptocurrencies as a speculative asset class that is still a dangerous enterprise.
Tokenization is promising
Hsu believes that tokenization provides a ground-breaking answer to a crucial monetary problem that has plagued the human monetary system for millennia — settlement.
Hsu mentioned:
“Tokenization is concentrated on fixing an precise downside, and that downside is settlement.”
Hsu defined that within the conventional monetary world, each asset switch includes a number of intermediaries and checks to confirm its validity earlier than it may be formally settled within the recipient’s fingers.
These layers of verification processes usually include extra prices which will finally be borne by the shopper, including a component of threat to the transaction. Moreover, these processes are sometimes mired in legacy techniques and methodologies, including vital delays and dangers.
In line with Hsu:
“Tokenization holds the promise to break down that and to simplify it — if it’s accomplished proper.”
He added that there’s increasingly curiosity in tokenization, and the OCC is internet hosting a symposium on tokenization in February additional to determine basis for the expertise’s software.
Crypto is simply too dangerous
Nevertheless, the appearing chief’s optimism about tokenization is accompanied by reservations relating to the broader cryptocurrency business.
Hsu highlighted the rising disconnect between tokenization and cryptocurrencies, characterizing the latter as primarily pushed by speculative good points. He added that:
“There appears to be increasingly of a divide between crypto on one hand and tokenization of real-world belongings on the opposite.”
The appearing chief mentioned that cryptocurrencies convey with all of them types of threat elements that establishments are hesitant to have interaction with. Hsu added that the business continues to be primarily fueled by hypothesis and the will to earn money.
Hsu additionally highlighted that KYC (Know Your Buyer) points don’t have an effect on tokenization, whereas its nearly inconceivable to inform who owns a selected pockets on a blockchain. He additionally expressed skepticism relating to the illicit monetary exercise within the business, saying:
“It nonetheless stays replete with frauds, scams, and hacks.”
Hsu mentioned that applied sciences want to resolve real-world issues to realize traction among the many populace, and crypto continues to be searching for the issue it will probably remedy.
Hsu’s stance displays the regulatory challenges dealing with the cryptocurrency business, which has encountered points associated to investor safety, market manipulation, and the absence of clear regulatory frameworks.
Regardless of the improvements and potentials throughout the crypto house, the prevalence of fraudulent actions has remained a big concern for regulators and buyers alike.