The appearing chief of the U.S. Workplace of the Comptroller of the Forex (OCC), Michael Hsu, mentioned he’s optimistic concerning the transformative potential of tokenization however continues to be cautious of the crypto because of 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 continues to be a dangerous enterprise.
Tokenization is promising
Hsu believes that tokenization presents a ground-breaking answer to a essential monetary problem that has plagued the human monetary system for millennia — settlement.
Hsu mentioned:
“Tokenization is targeted on fixing an precise downside, and that downside is settlement.”
Hsu defined that within the conventional monetary world, each asset switch entails a number of intermediaries and checks to confirm its validity earlier than it may be formally settled within the recipient’s arms.
These layers of verification processes usually include further prices which will finally be borne by the client, 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 response to Hsu:
“Tokenization holds the promise to break down that and to simplify it — if it’s completed 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 a superb basis for the know-how’s software.
Crypto is just too dangerous
Nonetheless, the appearing chief’s optimism about tokenization is accompanied by reservations relating to the broader cryptocurrency trade.
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 deliver with all of them types of threat components that establishments are hesitant to interact with. Hsu added that the trade continues to be primarily fueled by hypothesis and the need to earn cash.
Hsu additionally highlighted that KYC (Know Your Buyer) points don’t have an effect on tokenization, whereas its virtually unimaginable to inform who owns a selected pockets on a blockchain. He additionally expressed skepticism relating to the illicit monetary exercise within the trade, saying:
“It nonetheless stays replete with frauds, scams, and hacks.”
Hsu mentioned that applied sciences want to unravel real-world issues to realize traction among the many populace, and crypto continues to be on the lookout for the issue it could actually resolve.
Hsu’s stance displays the regulatory challenges going through the cryptocurrency trade, which has encountered points associated to investor safety, market manipulation, and the absence of clear regulatory frameworks.
Regardless of the improvements and potentials inside the crypto area, the prevalence of fraudulent actions has remained a big concern for regulators and buyers alike.