U.S. Banking Watchdog Makes Case for Tokenization, Just Not on Public Blockchains

OCC chief Michael Hsu – a crypto critic – argued asset tokenization is the future, but he said centralized efforts are the way ahead.

AccessTimeIconJun 16, 2023 at 3:54 p.m. UTC
Updated Jun 16, 2023 at 4:10 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Self-styled crypto skeptic Michael Hsu, the acting head of the U.S. Office of the Comptroller of the Currency (OCC), said tokenization of assets is a serious advance into the future of finance, but decentralized blockchains may be too problematic to handle that movement.

Achieving decentralization, security and scale all at once “is not possible with a public blockchain,” Hsu said at an American Bankers Association event on Friday.

“As a result, the crypto industry remains largely self-referential and disconnected from the real world,” he said. The sector is “immature and rife with risks, despite several years in the mainstream spotlight, billions of dollars of venture capital investment and millions of hours of code commits.”

Though U.S. banking regulators including the OCC have warned the institutions they regulate that involvement in crypto needs exacting scrutiny, a number of financial firms – including Wall Street banks – have experimented with managing their own blockchain projects. Hsu said such “centrally operated, trusted blockchains have the potential to deliver security and achieve scale efficiently.” He added that tokenization “does not require decentralization and trustlessness.”

“With tokenization, the instruction, transaction, and settlement can theoretically be collapsed into a single step, removing those frictions – provided, of course, that the technology is interoperable with central bank money and real-world settlement systems,” he said. “The legal foundations for tokenization need to be developed.”

Edited by Sheldon Reback.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.