The performing chief of the U.S. Workplace of the Comptroller of the Foreign money (OCC), Michael Hsu, stated he’s optimistic concerning 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. Alternatively, he dismissed cryptocurrencies as a speculative asset class that continues to be a dangerous enterprise.
Tokenization is promising
Hsu believes that tokenization gives a ground-breaking answer to a crucial monetary problem that has plagued the human monetary system for millennia — settlement.
Hsu stated:
“Tokenization is targeted on fixing an precise drawback, and that drawback 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 further prices that will in the end be borne by the client, including a component of threat to the transaction. Moreover, these processes are sometimes mired in legacy methods and methodologies, including important delays and dangers.
In keeping with Hsu:
“Tokenization holds the promise to break down that and to simplify it — if it’s completed proper.”
He added that there’s an increasing number of curiosity in tokenization, and the OCC is internet hosting a symposium on tokenization in February additional to ascertain a very good basis for the expertise’s utility.
Crypto is just too dangerous
Nonetheless, the performing chief’s optimism about tokenization is accompanied by reservations concerning 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 an increasing number of of a divide between crypto on one hand and tokenization of real-world property on the opposite.”
The performing chief stated that cryptocurrencies carry with all of them kinds of threat components that establishments are hesitant to have interaction with. Hsu added that the trade continues to be primarily fueled by hypothesis and the will to generate income.
Hsu additionally highlighted that KYC (Know Your Buyer) points don’t have an effect on tokenization, whereas its virtually unattainable to inform who owns a selected pockets on a blockchain. He additionally expressed skepticism concerning the illicit monetary exercise within the trade, saying:
“It nonetheless stays replete with frauds, scams, and hacks.”
Hsu stated that applied sciences want to unravel real-world issues to achieve traction among the many populace, and crypto continues to be searching for the issue it may clear up.
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 throughout the crypto area, the prevalence of fraudulent actions has remained a big concern for regulators and traders alike.