Michael Hsu, the acting head of the U.S. Office of the Comptroller of the Currency (OCC), has declared that tokenization of assets is a serious advance into the future of finance. However, he believes that decentralized blockchains may be too problematic to handle that movement. “Achieving decentralization, security, and scale all at once is not possible with a public blockchain,” Hsu said at an American Bankers Association event on Friday.
Despite warnings from U.S. banking regulators, a number of financial firms have experimented with managing their own blockchain projects. Hsu believes that “centrally operated, trusted blockchains have the potential to deliver security and achieve scale efficiently.” He added that tokenization “does not require decentralization and trustlessness.”
“With tokenization, the instruction, transaction, and settlement can theoretically be collapsed into a single step, removing those frictions—provided, of course, that the technology is interoperable with central bank money and real-world settlement systems,” Hsu said. “The legal foundations for tokenization need to be developed.”