GAO tells FDIC: talk to your friends about blockchain before it texts first 🧩

The U.S. Government Accountability Office is pressing the Federal Deposit Insurance Corporation to set up a standing coordination channel with other federal regulators to address risks tied to blockchain technology, according to a June 8 letter to FDIC Chairman Travis Hill made public on Monday. The GAO said it first flagged the recommendation as a priority in May of last year, noting that blockchain has sat on its "High Risk List" because regulators have struggled to oversee blockchain-based financial products and the risks they could pose to U.S. markets.

The letter pointed to the FDIC's expanded role under the GENIUS Act, passed last year, which designates the agency as the primary regulator for stablecoin issuers that are subsidiaries of the banks it supervises. It also comes as Senate lawmakers weigh legislation that would map out how federal agencies regulate the wider crypto market, including $BTC and $ETH-traded products.

The GAO said it concluded in 2023 that financial regulators "lacked an ongoing coordination mechanism for addressing blockchain risks" and added that "blockchain-related financial products and services have grown substantially." "Establishing such a mechanism, as we recommended, would help FDIC and other regulators collectively identify risks and develop and implement a regulatory response in a timely manner," the office wrote.

Separately, the watchdog urged the FDIC to require its supervisors to rotate among the banks they oversee, citing a 2024 finding that the agency did not mandate such moves, a practice that "could compromise their independence and interfere with supervision outcomes." The GAO said a rotation requirement "could mitigate threats to independence" and noted that the failures of Silicon Valley Bank, Silvergate Bank and Signature Bank in March 2023, each with significant crypto industry exposure, "raised questions" about whether watchdogs did enough to ensure institutions "promptly addressed supervisory concerns."