Michelle Bowman, a Board of Governors member at the U.S. Federal Reserve System, has voiced concerns about the lack of a well-defined regulatory structure for emerging technologies within the United States. Fed Governor Michelle Bowman has expressed concerns that the absence of clear guidelines regarding digital assets could pose substantial risks for banks as they navigate an environment of rising interest rates.
In her address at the Salzburg Global Seminar focused on bank regulation and supervision, Michelle Bowman emphasized the need for global regulators to prioritize oversight of new banking practises, specifically banking as a service and digital assets. Bowman highlighted the prevailing lack of effective supervision for emerging technologies, which has resulted in financial institutions being stranded in a state of inadequate oversight she termed a “supervisory void.”
Bowman, whose tenure at the Federal Reserve extends until 2034, highlighted the prevailing uncertainty surrounding the permissibility and supervisory expectations pertaining to novel banking activities. Despite some attempts to offer guidance, a significant level of ambiguity persists. This places banks in a precarious situation, as they are compelled to rely on vague and non-binding statements from policymakers, which may subject them to future criticism.
Furthermore, the governor underscored the potential risks associated with the existing regulatory landscape. She emphasized that in the absence of a well-defined regulatory framework, regulators could impose new obligations on businesses after substantial investments have already been made. “If our objective is to ensure effective supervision and regulation, we must be prepared to actively participate in overseeing both innovative and conventional activities,” she emphasized.
The House Financial Services Committee and House Agriculture Committee lawmakers have unveiled a preliminary proposal that presents a potential route for classifying specific crypto assets as digital commodities. The draught legislation aims to prevent the U.S. Securities and Exchange Commission (SEC) from rejecting the registration of digital asset trading platforms as regulated alternative trading systems. Additionally, the bill would grant these platforms the ability to provide services involving “digital commodities and payment stablecoins.”
Bowman cautioned that the absence of a well-defined strategy for financial institutions regarding emerging technologies could have substantial ramifications, especially as banks navigate an environment of rising interest rates.