Overseer Michelle Bowman, vice-chairman of the Federal Reserve, calls for banks to embrace blockchain technology or risk losing its connection.
at On August 19th of the Wyoming Blockchain Symposium, Bowman highlighted that regulators and banks must adopt a more proactive approach to the crypto industry.
She noted that integrating these new and innovative technologies is important to maintain a connection to the rapidly evolving financial environment.
She said:
“It is essential that banks and regulators be open to engage in new technologies and deviating from an overly prudent way of thinking. Regulators must understand new products and services and recognize the utility and need to adopt technology in the traditional financial sector.”
Federal Reserve executives argued that this shift is not an option, but is necessary for the continued vitality of the banking system. She added that institutions that fail to evolve could become players in the vicinity, but future-looking banks can strengthen their position in the market.
Tokenization as an Immediate Use Case
Bowman highlighted tokenization as one of the most immediate applications on the blockchain. She explained that tokenized assets can be transferred digitally without the physical movement of intermediaries or securities.
She said the approach would eliminate many manual procedures and management coordination that are currently creating delays and increasing operational risks.
Furthermore, Bowman pointed out that tokenized systems can streamline these procedures, reduce operational friction, and increase market access.
Therefore, the Fed noted that regulatory integrity can move tokenization from pilot projects that benefit both major banks and small community institutions to mainstream adoption.
Prevent fraud
Beyond the efficiency of tokenization, Bowman highlighted the possibility of fighting blockchain fraud.
In her speech, she acknowledged that financial institutions face risks from identity theft, fraud and related crimes.
But she argued that if blockchain can reduce fraud so that it can measure it, regulators should encourage recruitment rather than hinder it.
According to her:
“If new technology can be used to address fraud, then regulatory frameworks should be kept out of the way. We see this as an exciting opportunity for industry-Fed collaboration.”
