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The acting chief of the U.S. Office of the Comptroller of the Currency (OCC), Michael Hsu, said he is optimistic about the transformative potential of tokenization but continues to be wary of the crypto due to high levels of risk.

Hsu made the statement during a talk at the DC Fintech Week in Washington on Nov. 7.

While the majority of his time was spent talking about banking supervision, he also highlighted the benefits of tokenization in streamlining the settlement of funds and securities. On the other hand, he dismissed cryptocurrencies as a speculative asset class that remains a risky venture.

Hsu believes that tokenization offers a ground-breaking solution to a critical financial challenge that has plagued the human financial system for millennia — settlement.

Hsu said:

“Tokenization is focused on solving an actual problem, and that problem is settlement.”

Hsu explained that in the traditional financial world, every asset transfer involves multiple intermediaries and checks to verify its validity before it can be officially settled in the recipient’s hands.

These layers of verification processes often come with additional costs that may ultimately be borne by the customer, adding an element of risk to the transaction. Furthermore, these processes are often mired in legacy systems and methodologies, adding significant delays and risks.

According to Hsu:

“Tokenization holds the promise to collapse that and to simplify it — if it’s done right.”

He added that there is more and more interest in tokenization, and the OCC is hosting a symposium on tokenization in February further to establish a good foundation for the technology’s application.

However, the acting chief’s optimism about tokenization is accompanied by reservations regarding the broader cryptocurrency industry.

Hsu highlighted the growing disconnect between tokenization and cryptocurrencies, characterizing the latter as primarily driven by speculative gains. He added that:

“There seems to be more and more of a divide between crypto on one hand and tokenization of real-world assets on the other.”

The acting chief said that cryptocurrencies bring with them all sorts of risk factors that institutions are hesitant to engage with. Hsu added that the industry is still primarily fueled by speculation and the desire to make money.

Hsu also highlighted that KYC (Know Your Customer) issues do not affect tokenization, whereas its almost impossible to tell who owns a particular wallet on a blockchain. He also expressed skepticism regarding the illicit financial activity in the industry, saying:

“It still remains replete with frauds, scams, and hacks.”

Hsu said that technologies need to solve real-world problems to gain traction among the populace, and crypto is still looking for the problem it can solve.

Hsu’s stance reflects the regulatory challenges facing the cryptocurrency industry, which has encountered issues related to investor protection, market manipulation, and the absence of clear regulatory frameworks.

Despite the innovations and potentials within the crypto space, the prevalence of fraudulent activities has remained a significant concern for regulators and investors alike.

The post Acting OCC chief says tokenization holds immense promise, but crypto still risky appeared first on CryptoSlate.

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