FDIC urged to coordinate crypto oversight across U.S. agencies

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FDIC crypto oversight urged

Highlights

The GAO urges FDIC Chairman Travis Hill to coordinate ongoing oversight of blockchain risks among U.S. regulators, referencing recommendations first made in May 2023.
Blockchain technology remains on the GAO High Risk List, as federal agencies lack mechanisms to collectively identify and respond to threats posed by blockchain-based financial products.
The GAO recommends FDIC adopt case manager rotation for banks after its 2024 review linked supervision gaps to the 2023 failures of crypto-exposed banks like Silicon Valley Bank and Signature Bank.

GAO recommendations on blockchain oversight

As reported by Cointelegraph citing the U.S. Government Accountability Office, a June 8 letter made public on Monday urges FDIC Chairman Travis Hill to act on recommendations first flagged in May last year, including steps to address risks tied to blockchain technology.

The GAO says blockchain technology remains on its High Risk List because regulators have struggled to oversee blockchain-based financial products and the threats they could pose to U.S. markets. In the letter, the watchdog says it found in 2023 that financial regulators lacked an ongoing coordination mechanism for addressing blockchain risks, even as blockchain-related financial products and services have grown substantially.

The agency says establishing such a mechanism would help the FDIC and other regulators collectively identify risks and develop and implement a regulatory response in a timely manner. Under the GENIUS Act passed last year, the FDIC is the main regulator for stablecoin issuers that are subsidiaries of the banks it supervises, while Senate lawmakers are currently considering separate legislation for broader federal crypto market oversight.

Supervision concerns after 2023 bank failures

The GAO also urges the FDIC to rotate case managers assigned to banks, saying a lack of rotation could weaken supervisory independence. It says a 2024 review found the agency did not require supervisors to move between banks, a gap that could interfere with supervision outcomes and that a rotation requirement could mitigate.

The watchdog links the issue to the collapse of several crypto and tech-focused banks in 2023, which it says raised questions about whether bank regulators took enough action to ensure institutions promptly addressed supervisory concerns. Silicon Valley Bank, Silvergate Bank and Signature Bank, all with significant exposure to the crypto industry, collapsed within less than a week in March 2023 amid fallout from the FTX bankruptcy, which sent crypto markets tumbling.

Our earlier coverage of the CFTC’s approval of bitcoin perpetual futures in the U.S. explained how regulators are seeking to bring an offshore-style crypto derivatives product under domestic rules to strengthen oversight and investor protections. We also outlined the debate over retail access and leverage risks, including industry criticism and the rapid early volume reported by Kalshi after launching the contracts.

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