Banks should keep three principles in mind as they approach new technologies like tokenization and artificial intelligence—innovate in stages, build brakes while building the engine, and engage regulators early and often, Acting Comptroller of the Currency Michael Hsu said today. Speaking at the ABA Risk and Compliance Conference, Hsu reiterated his skepticism of cryptocurrency and his concerns that AI could be used to produce discriminatory results and be used to facilitate fraud. But he also acknowledged that AI and the blockchain technology that facilitates crypto could have many benefits for the banking sector.
Hsu laid out a three-step approach for banks when managing risk when adopting new technologies. First, innovate in stages, expand only when necessary, and monitor, adjust and repeat. Second, build in brakes by making sure risk and compliance professionals are part of the process and have their voices heard. Third, engage with regulators during the process rather than engaging with them afterward.
“The OCC recognizes that rapid innovations also require a more responsive approach by regulators,” Hsu said. “We are committed to being agile and credible on financial technology developments so that we can balance prudence with innovation and growth. Freezing the banking system in place is not an option nor is blindly embracing all innovation for innovation’s sake. We must be able to navigate a more nuanced path, where responsible and purposeful innovations can be brought to market and a combination of controls, culture and common sense can prevent irresponsible innovations from emerging.”
