GAO urges FDIC to coordinate with agencies on blockchain risks
In brief
- GAO made recommendations public Monday in letter to FDIC Chairman Travis Hill
- Federal regulators lack ongoing coordination mechanism for blockchain technology risks
- FDIC urged to rotate case managers assigned to banks for stronger supervision
- Blockchain placed on GAO's High Risk List due to regulatory gaps
Coordination Gap Widens
The GAO found in 2023 that financial regulators "lacked an ongoing coordination mechanism for addressing blockchain risks." Since then, blockchain-related financial products and services have grown substantially, widening the oversight gap. Blockchain technology was placed on the GAO's High Risk List because regulators have struggled to oversee blockchain-based financial products.
The GAO's core recommendation: establish a formal mechanism for the FDIC and other regulators to collectively identify emerging risks and develop regulatory responses. The need is acute. Under the GENIUS Act passed last year, the FDIC is the main regulator for stablecoin issuers that are subsidiaries of banks it supervises, placing new responsibilities on an agency already stretched thin.
Supervision Gaps at the FDIC
The watchdog also flagged a staffing issue. The GAO urged the FDIC to rotate case managers assigned to banks to strengthen supervision of the sector. A 2024 GAO finding revealed the agency did not require supervisors to rotate to different banks, a practice designed to prevent regulatory capture and stale oversight.
The timing matters. Silicon Valley Bank, Silvergate Bank, and Signature Bank collapsed in less than a week in March 2023, all with significant exposure to crypto. That crisis exposed how quickly interconnected risks can metastasize when regulators lack visibility and coordination.
The GAO's letter signals that without structural changes, the FDIC and its peer agencies will continue reacting to crises rather than preventing them. The ball is now in the regulator's court.
