The performing chief of the U.S. Workplace of the Comptroller of the Forex (OCC), Michael Hsu, stated he’s optimistic in regards to 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. However, he dismissed cryptocurrencies as a speculative asset class that continues to be a dangerous enterprise.
Tokenization is promising
Hsu believes that tokenization affords a ground-breaking answer to a vital monetary problem that has plagued the human monetary system for millennia — settlement.
Hsu stated:
“Tokenization is concentrated 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 palms.
These layers of verification processes typically include further prices that will finally be borne by the client, including a component of threat to the transaction. Moreover, these processes are sometimes mired in legacy programs and methodologies, including important delays and dangers.
In line with Hsu:
“Tokenization holds the promise to break down that and to simplify it — if it’s performed 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 determine a great basis for the know-how’s software.
Crypto is simply too dangerous
Nevertheless, the performing chief’s optimism about tokenization is accompanied by reservations relating to the broader cryptocurrency business.
Hsu highlighted the rising disconnect between tokenization and cryptocurrencies, characterizing the latter as primarily pushed by speculative features. He added that:
“There appears to be an increasing number of of a divide between crypto on one hand and tokenization of real-world belongings on the opposite.”
The performing chief stated that cryptocurrencies carry with all of them kinds of threat elements that establishments are hesitant to have interaction with. Hsu added that the business continues to be primarily fueled by hypothesis and the need to make cash.
Hsu additionally highlighted that KYC (Know Your Buyer) points don’t have an effect on tokenization, whereas its nearly not possible to inform who owns a specific pockets on a blockchain. He additionally expressed skepticism relating to the illicit monetary exercise within the business, saying:
“It nonetheless stays replete with frauds, scams, and hacks.”
Hsu stated that applied sciences want to unravel real-world issues to realize traction among the many populace, and crypto continues to be searching for the issue it might remedy.
Hsu’s stance displays the regulatory challenges dealing with the cryptocurrency business, 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 major concern for regulators and buyers alike.