The US Government Accountability Office has urged the Federal Deposit Insurance Corporation to make an effort to coordinate with other federal agencies to address risks from blockchain technology.
GAO made a June 8 letter to FDIC Chairman Travis Hill public on Monday, which said that it first flagged priority recommendations with the regulator in May last year, including addressing blockchain technology risks.
It said that blockchain technology was an area of concern that it put on its “High Risk List,” as it deems that regulators have struggled to oversee blockchain-based financial products and the risks they could pose to US markets.
Under the GENIUS Act passed last year, the FDIC is the main regulator for stablecoin issuers that are subsidiaries of the banks it supervises. Senate lawmakers are currently looking to pass a bill that would outline how federal agencies would regulate the wider crypto market.
Source: U.S. GAO
In its letter to Hill, the GAO said that it found in 2023 that financial regulators “lacked an ongoing coordination mechanism for addressing blockchain risks” and in the meantime, “blockchain-related financial products and services have grown substantially.”
“Establishing such a mechanism, as we recommended, would help FDIC and other regulators collectively identify risks and develop and implement a regulatory response in a timely manner,” it added.
The GAO also urged that the FDIC rotate case managers assigned to banks to strengthen supervision of the sector.
Related: FDIC moves to regulate stablecoin issuers under the GENIUS Act
It said it found in 2024 that the agency did not require supervisors to rotate to different banks, which “could compromise their independence and interfere with supervision outcomes,” and a rotation requirement “could mitigate threats to independence.”
The GAO said that the failure of multiple crypto and tech industry-linked banks in 2023 “raised questions” about whether the bank watchdogs took enough action to ensure institutions “promptly addressed supervisory concerns.”
Silicon Valley Bank, Silvergate Bank and Signature Bank, which all had significant exposure to the crypto industry, all collapsed in less than a week in March 2023 in the fallout of the bankruptcy of FTX, which sent crypto markets tumbling.
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