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Federal regulators and industry urge ‘why then how’ approach to tokenization; pilots, interoperability and legal clarity needed
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Summary
A multi‑agency regulator panel and industry speakers at the OCC symposium urged purpose‑driven pilots, interagency coordination and technology‑neutral regulation. Agencies emphasized supervision of banks’ tokenization activity, third‑party risk, and the need to align legal frameworks before scaling.
Regulators from the Federal Reserve, SEC, FDIC, CFTC and OCC used a mid‑day panel at the OCC symposium to stress a consistent message: focus on the problem you are solving, test in controlled pilots, and coordinate regulatory expectations across agencies before broad adoption.
Sonya Danberg (Federal Reserve) said the Fed is taking an ‘open‑minded realist’ approach, assembling multidisciplinary teams to evaluate how tokenization might affect central‑bank mandates, payments safety and financial stability. Val Stefanik (SEC) urged a facts‑and‑circumstances approach that examines whether tokenized offerings are securities and how they are structured. Donna Murphy (OCC) and Luke Brown (FDIC) emphasized banks’ supervisory responsibilities when relying on third parties and the need for firms to manage vendor, operational and compliance risks.
Industry speakers described practical paths forward. Jennifer Peavey (DTCC) explained DTCC’s testnet and control taxonomy for pilot use cases (custody, scalability, cyber resilience) and urged industry sandboxes to validate legal and operational controls. Jesse McWaters (Mastercard) described multi‑rail approaches to payments and experiments using tokenized instruments for real‑estate and other transaction types.
Why it matters: Regulators signaled interest in permissive but cautious engagement — encouraging pilots but warning that legal uncertainty about rights and redemption will constrain bank participation until governance, custody and insolvency treatments are clarified. Industry said that moving from pilots to scaled deployments will require solving custody, interoperability and market‑structure incentives.
Quote: Donna Murphy summarized a core supervisory expectation: banks that use third parties for tokenized services must “understand the technology and understand the risks and manage those risks as if the bank itself is offering [the service].”
Next steps: Agencies encouraged continued cross‑agency dialogue, coordinated pilots that include legal workstreams, and industry engagement with innovation hubs to test custody, redemption and inter‑ledger interoperability.
