- Bowman emphasized the need for regulators to actively oversee both innovative and traditional banking activities to fulfill their effective supervision and regulation role.
- She talked about the need for global regulators to address the supervision of emerging banking activities, specifically highlighting banking as a service and digital assets.
Federal Reserve Governor Michelle Bowman has again brought to attention the need for a regulatory framework for crypto and digital assets. In a recent speech at the Salzburg Global Seminar, Federal Reserve’s Bowman emphasized the need for global regulators to address the supervision of emerging banking activities, specifically highlighting banking as a service and digital assets.
She further expressed concern that financial institutions are operating in a “supervisory void” when it comes to these innovative technologies.
“While there have been some efforts to provide guidance, there remains substantial uncertainty about the permissibility of and supervisory expectations for these activities. This leaves banks in the perilous position of relying on general but non-binding statements by policymakers only to be criticized at some point in the future,” said Bowman in her speech.
Cautioning that the absence of a well-defined framework could result in regulators imposing additional obligations on businesses after significant investments have been made, Bowman emphasized the need for regulators to actively participate in overseeing both innovative and traditional banking activities to fulfill their role of effective supervision and regulation.
Failure to provide a clear approach for financial institutions on novel technologies “could have significant consequences for banks navigating higher interest rates,” she cautioned.
This is not the first time Bowman has publicly expressed her concern surrounding the crypto and digital sector. In January this year, the Fed Governor stated banks should be allowed to experiment with crypto and efforts to mitigate risks related to this type of activity should not go so far as to drive it out of the supervised space altogether.
A few months down the lane, in April, in another republic forum, she went all guns blazing at Central Bank Digital Currency(CBDC). She had then argued that CBDC) could intrude on the privacy of users and harm the banking system while providing few benefits that aren’t otherwise available for banked and unbanked consumers alike.