Banks and crypto assets

An interesting opinion was expressed by Travis Hill, Deputy Chairman of the US Federal Deposit Insurance Corporation (FDIC).

Hill criticized American regulators for restricting digital assets and blockchain technology.

First of all, he had in mind two documents:

• Joint Statement of Regulators (FCSD, Fed, Foreign Exchange Control Authority), in which banks are warned about the risks of crypto business 

• SEC instruction that requires banks to put crypto assets on the balance sheet as liabilities.

At first glance, there is logic in the actions of regulators. These warnings and restrictions apply only to banks. Authorities fear that if cryptocurrencies are used en masse, their volatility may be transmitted to the banking system. This, of course, carries risks for the financial infrastructure.

From the point of view of the crypto business, the participation of fiat banks is not always a blessing. Cryptocurrencies and fiats are strategically competing technologies, and banks, as part of the existing financial system, will seek to take control of the crypto.

Travis Hill very reasonably pointed out that it is necessary to distinguish between a cryptocurrency, which can indeed be volatile, and tokenized assets.

Such regulatory policies limit the use of blockchain technology, which obviously has a negative impact on business and the entire economy.

Hill criticized the SEC’s position requiring banks to classify cryptocurrencies into liabilities, making their storage too expensive.

It should be said here that the issue of the use of crypto-assets by banks is quite principled. Banks are interested in storing the crypt for the benefit of customers and conducting speculative operations. 

Regulators are against it.

Hill reasonably suggests splitting the cryptocurrency itself from the tokens released as part of blockchain projects and related to real assets.

Tokenized assets are not a direct competitor to the fiat, may be quite stable and do not carry special risks for banks.

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