Bowman Criticizes Lack of Regulatory Framework

During a speech at the Salzburg Global Seminar on Bank Regulation and Supervision, Michelle Bowman urged global regulators to focus on the current oversight of novel banking activities, including banking as a service and digital assets.

In terms of emerging technologies, financial institutions have been left without supervision, according to Bowman.

“Although some efforts have been made to provide guidance, there is still a great deal of uncertainty regarding the permissibility and supervisory expectations for these activities […]. This places institutions in the precarious position of relying on general, non-binding statements from policymakers, only to be criticized in the future,” said Bowman, whose term at the Federal Reserve expires in 2034.

In addition, the governor discussed the risks presented by the current regulatory environment, noting that without a clear regulatory framework, regulators may impose new requirements on businesses after they have made substantial investments.

“If our role is effective supervision and regulation, we must be open to novel and conventional activities,” she continued.

Bowman joins dozens of others in advocating for a transparent regulatory framework for digital assets.

The rating agency Moody’s warned on June 20 that investors and companies might seek crypto-friendly jurisdictions outside the United States if U.S. legislators do not support legislation focusing on digital assets.

The House Financial Services Committee and the House Agriculture Committee have recently released a discussion draft offering certain crypto assets a path to being labeled as digital commodities.

The proposed legislation would prohibit the U.S. Securities and Exchange Commission (SEC) from denying digital asset trading platforms registration as a regulated alternative trading system. It would permit such companies to offer “digital commodities and payment stablecoins.

Bowman cautioned that failure to provide a clear strategy for financial institutions regarding emerging technologies “could have significant consequences for banks navigating higher interest rates.

Michelle Bowman, a member of the Board of Governors of the Federal Reserve System in the United States, has criticized the lack of a defined regulatory framework for novel technologies in the United States.