Hill, speaking at George Mason University’s Mercatus Center, criticized the FDIC's lack of regulatory clarity concerning blockchain and distributed ledger technology. He argued that this ambiguity has fostered a perception among the public that the FDIC would halt operations if financial institutions showed interest in blockchain-related activities. Hill acknowledged the challenges regulators face in issuing policies for rapidly evolving technologies but emphasized the importance of clarity in delineating permissible activities and ensuring safety and soundness.
Additionally, Hill voiced opposition to SAB 121, the SEC's adoption of accounting notices mandating banks to include digital assets on their balance sheets. He highlighted the distinct treatment of digital assets compared to other assets held in trust, noting that on-balance sheet recognition triggers stringent capital, liquidity, and prudential requirements for custodian banks. This, according to Hill, presents significant challenges for banks seeking to engage in digital asset activities on a large scale.
In response to concerns over SAB 121, the House Financial Services Committee voted in favor of a resolution aimed at overriding it if approved. The resolution awaits a vote by the full House of Representatives. Hill's remarks follow the FDIC's assertion in its 2023 Risk Review Report that cryptocurrencies introduce "novel and complex risks" to the financial system.
In December 2023, the FDIC approved a modernized advertising rule designed to curb misrepresentations and false advertising regarding deposit insurance coverage. Dennis Kelleher, CEO of financial nonprofit Better Markets, commended the FDIC's efforts to address misconduct in the cryptocurrency industry. Kelleher noted instances where investors were misled by cryptocurrency companies like Gemini Earn, FTX US, and Voyager Digital into believing their investments were insured by the FDIC. He applauded the FDIC's action to update and strengthen rules to combat such misconduct.
