Regulations governing tokenization should be risk based and technology neutral, and they should allow banks to use distributed ledger technology in a safe and sound manner for more efficient, risk-reducing and cost-effective solutions, the American Bankers Association said today in comments to the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, which held a hearing on tokenization.
ABA noted that many financial institutions are exploring the use of blockchain or other types of distributed ledger technology to support the tokenization of commercial bank money and other real-world assets. Several ABA members are participating in various payments and assets tokenization projects to test settlement, delivery versus payment, payment versus payment, network interoperability and related concepts, the association added.
ABA reiterated its opposition to the establishment of a consumer-facing or retail central bank digital currency, saying that tokenization may address some of the goals proponents of a retail CBDC seek to achieve. It also advocated for flexible regulation of tokenization technology. “Technological evolution is rapid, and highly prescriptive regulation cannot be adjusted quickly enough to remain current,” ABA said. “Inflexibility would constrict financial inclusion and other benefits of emerging technology.”
