The United States’ top banking regulators have now clarified how banks should handle tokenized securities.
On March 5, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly issued guidance confirming that blockchain-based securities will be subject to the same capital requirements as their traditional counterparts.
“Technology neutral”
Regulatory capital rules are fundamentally neutral regarding the technology used to issue or record an asset, according to the new guidance.
The agency has clarified that the methods used for issuing a security do not affect key financial characteristics.
Banks and financial institutions holding eligible tokenized assets will not be encumbered by additional capital buffers simply because the asset exists on a blockchain infrastructure.
Permissioned vs. permissionless
With the new guidance, regulators are striving to be technology-neutral.
If a bank holds a traditional asset like a stock or a bond, it no longer matters if these assets are tokenized on a blockchain recorded in an old-school legacy database. The agencies confirmed that these “eligible tokenized securities” will get the exact same capital treatment.
More institutional charges?
Before this update, banks were largely stuck in limbo. A lot of traditional institutions were hesitant to seriously experiment with tokenizing real-world assets because they were worried regulators would penalize them with heavy capital buffers.
By removing that regulatory guesswork, the Fed, FDIC, and OCC just gave traditional finance a massive green light to adopt blockchain tech.
That being said, the regulators made sure to point out that this isn’t a free-for-all. Banks diving into tokenized assets are still on the hook for strict risk management.