Skip to main content

I (OC)C You!

I recently took a course on banking law and am convinced that big banks are evil. But that's not what's important here. What is important here is that the Office of the Comptroller of the Currency, one of the primary federal regulators of national banks, has recently published an Advance Notice of Proposed Rulemaking in anticipation of its plans to review its regulations on digital banking activities.

The ANRP essentially invites input from the public (read: banking and tech firms) on how the OCC should consider current technological advancements in the regulatory framework. Lots of technologies get a "shout out" in the notice--clouding computing, artificial intelligence, biometrics, data analytics and our beloved distributed ledger and technology. Along with the "shout outs," the notice touches on the benefits of all this new technology (new products, more efficiency, further reach) and the inherent challenges (cybersecurity risks, increased competition from non-banks, changing customer needs). Ultimately, the OCC is contemplating whether some of these new activities (borne out of new technologies) are unnecessarily burdened by the existing regulatory framework as well as how these activities "promote economic growth and opportunity and ensure that banks operate in a safe and sound manner, provide fair access to financial services, [and] treat customers fairly."

It'll be interesting to see how the regulations change, if they change at all. On the one hand, the current regulatory framework seems to allow banks plenty of flexibility to deploy new technologies--both in terms of infrastructure and products. But big banks and other systemically important financial institutions (SIFIs) (a.k.a., "too big to fail") exert enormous influence on lawmaking when it comes to the realm of finance. If there are other avenues the big banks wish to pursue that are somehow made prohibitively burdensome by the current regulations, I have little doubt that they'll get the changes they want. I also suspect that if less big banks are innovating in ways that are threatening to big banks, the laws will take care of that, too.

Do you think the big banks will get their way? (This is obviously a trick question) If you want to see the banks throw their weight around, I strongly recommend the HBO film Too Big to Fail. It's a fantastic and maddening depiction of the 2008 financial crisis and the Treasury Secretary's fight to keep the financial system afloat.

Comments

Popular posts from this blog

The Rundown on CBDCs

Everyday there is a news report about a country that is "exploring" or "studying" the possibility of developing a central bank digital currency (CBDC). In the past few days, I've read articles about Rwanda, Israel and France looking to pilot programs with CBDCs. And yesterday, the Bank of International Settlements announced its backing of the development of CBDCs. With approximately 80% of central banks around the world taking a closer look at CBDCs, now is as good a time as any to learn more about them. What Are They? A central bank digital currency is exactly what it sounds like--a digital currency issued by a central bank. In the same way our central bank, the Federal Reserve, issues the U.S. dollar, it would similarly issue some official U.S. digital currency ('digital dollar'). This is pretty much where the simplicity of it all ends. Things get really hairy (really fast) when central banks have to figure out how CBDCs fit into a traditional financ

A Curious Crypto Caper Chronicle

The Hack Earlier this month, a hacker executed a massive crypto heist on PolyNetwork--a decentralized finance (DeFi) platform. The hacker was able to steal more than $600 million in crypto from thousands of users on three separate PolyNetwork blockchains (Binance Smart Chain, Ethereum & Polygon) and involving more than a dozen cyptocurrencies. In other words, this hack was * major *. The PolyNetwork protocol operates on multiple blockchains and allows users to send/receive tokens across these different blockchains using various smart contracts (also known as "bridges"). The hacker exploited a vulnerability in one of these smart contracts which maintains significant amounts of crypto to maintain liquidity and this allowed him to overwrite instructions and redirect all crypto funds to himself. From there, the hacker attempted to move the stolen crypto into various liquidity pools.   The Blacklist The hacker was successful in moving some of the crypto. But shortly after the

Finding Nemo: A Journey on the Blockchain

Imagine if Nemo was a salmon born and raised in a fish farm in Norway. And imagine if his life, including how many roommates he had, his environment and every meal he ate, was recorded. His death (mainly manner and date) were also recorded. His post-mortem journey to the U.S. was recorded, including where he may have stopped along the way, before making his way to the seafood section of your local grocery store. Now imagine if you could scan a QR code to get a snapshot of Nemo's life, death and journey to the U.S. before deciding to purchase him and do so knowing that his provenance is accurate and reliable. If you're lucky enough to patronize certain Whole Foods, you may be able to do this soon. A major producer of salmon in Norway is working to bring more transparency to its practices using blockchain as the infrastructure. As increasing numbers of consumers become mindful of environmental sustainability and ethical eating, these types of supply chain efforts will become mo