U.S. Banking Watchdog Hsu Says Tokenization Promising, But Crypto Full of Fraud

Tokenization of assets could be the answer to the risky complexities of settling the movement of funds and securities, said Michael Hsu, the acting head of the U.S. Office of the Comptroller of the Currency.

“Tokenization is focused on solving an actual problem, and that problem is settlement.” Hsu said at the DC Fintech Week event in Washington. “This is boring back-office stuff, but it’s super, super important.”

Any time an asset changes hands in the financial world, the transaction typically passes through multiple entities and checks of its validity before it’s cleared and settled to officially land in the hands of the recipient. At any of those layers – most of which carry their own expenses that may be added to what the customer pays – the transaction has some risk of failure.

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

His OCC is so engaged on the idea of the tokenization of real-world financial assets and liabilities that it’s hosting a Feb. 8, 2024, all-day discussion on the topic at its Washington headquarters. But when it comes to the rest of the crypto space, Hsu remains suspicious.

“There seems to be more and more of a divide between crypto on one hand and tokenization,” he said. Crypto, he said, “tends to be driven by the hope for speculative gain.””It still remains replete with frauds, scams and hacks,” Hsu said.