Michelle Bowman, who has served on the Board of Governors of the U.S. Federal Reserve System since 2015, has called on the crypto industry to focus on educating regulators about innovation, in order to boost the country’s leadership in the technological and financial sphere.
In his speech “Innovation and the evolution of the financial landscape”Bowman highlighted the importance of the work that the Chamber of Digital Commerce has been doing to integrate technologies such as Blockchain into policy discussions, with the aim of paving the way for innovation.
However, despite these efforts, the Fed governor believes that many regulators are still resistant to the innovation of these new technologies, mainly due to a lack of knowledge about the ways in which they can be implemented or integrated into existing environments and in compliance with applicable laws. Because of this, Bowman suggested the creation of new methodologies and the adoption of new educational approaches, which allow the transmission of knowledge about the potential of new technologies, such as blockchain and DLT, to legislators and regulators. This, according to Bowman, in order to “help regulators get to the ‘yes’ more frequently, and potentially pave the way for successful innovation in the banking system.”
The importance of understanding innovation
For the FED governor, innovation in the financial system can take many forms, which can be confusing and even an obstacle for regulators to understand its potential and importance. Therefore, she called on crypto industry participants to promote understanding of new technologies that are impacting the traditional financial system.
At the same time, Bowman called on financial regulators to be more receptive to innovation.
“The appeal of resisting innovation, resisting change, is that it preserves the familiar and the known. But the cost of resisting change can be great, as it promotes stagnation and inertia,” Bowman said in his speech.
According to the Fed governor, regulators' resistance to technological innovation could lead to a banking system that could be safer and smaller, but also less effective in providing banking products and services that support the growth and development of the American economy.
Feedback, key to the regulation of Blockchain and DLT
The development of blockchain and distributed ledger technology have represented two major innovations of our times. According to Bowman, these technologies are inspiring new ways of thinking and operating in the financial system, giving rise to new and more efficient platforms for data and asset exchange, cross-border payments and data storage, which in turn can ensure better operations by increasing transparency, improving information visibility and ensuring integrity.
However, regulation of these technological innovations has been complicated by the multitude of variations in applications and use cases.
The wide variety of technologies and the incorporation of different design elements has made it difficult for regulators to understand new technologies, so Bowman calls on the crypto industry to streamline its education and teaching processes to improve financial regulators’ understanding of the potential and transformative capabilities of these innovations.
As the country's financial policymaker, Bowman also noted that regulators must consider a number of considerations before proposing or implementing a policy change or supervisory approach to favor emerging technologies. However, he also emphasized that regulators can do more to promote innovation.
“Regulators can do more than just tolerate innovation, they can promote it through transparency and open communication,” Bowman said.
In conclusion to his speech, the FED governor stressed that regulators have a valuable role in defining a clear and sensible regulatory framework that can support and promote the development of innovators and encourage the creation of a stronger and more efficient financial system, hence the importance of educating financial regulators about innovation and the incorporation of new technologies.
Main image from The Wall Street Journal
