GAO Calls for Stronger Oversight of Blockchain Technologies in Banking
The independent government watchdog recommended that the Federal Deposit Insurance Corporation (FDIC) strengthen coordination with other financial regulators to help identify and address risks in the blockchain solutions and digital assets sector. According to the agency, the lack of coordinated oversight creates potential risks for the financial system.
The U.S. Government Accountability Office (GAO) called on the FDIC to strengthen oversight of the rapidly growing market for blockchain-related banking products and services. To identify, assess, and mitigate associated risks, the agency recommended establishing a permanent coordination mechanism with other U.S. financial regulators.
In a letter to FDIC Chairman
The letter emphasized that the market for blockchain-based financial products and services continues to expand, while the U.S. financial regulatory system requires closer cooperation among supervisory agencies. GAO said a permanent interagency mechanism would help regulators identify emerging risks in a timely manner and coordinate appropriate responses.
GAO’s second priority recommendation focused on banking supervision. Following the banking crises of 2023, auditors found that the FDIC didn’t require regular rotation of certain bank supervisors, a practice that could help safeguard the independence of supervisory decisions. GAO said implementing such requirements would improve the objectivity of oversight and the quality of decision-making.
According to GAO, federal agencies implemented 77% of the watchdog’s recommendations over the past five years, while the FDIC’s implementation rate stood at 80%. As of June, the agency still had six open GAO recommendations. Auditors said implementing them would improve oversight of financial institutions and better prepare the FDIC for risks stemming from the adoption of new technologies in the banking sector.
The development comes as U.S. senators recently released an updated version of the CLARITY Act, a bill aimed at regulating the crypto market, while the heads of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) reached an agreement on the allocation of supervisory responsibilities.
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