On December 5, the U.S. House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion
held a hearing on “Fostering Financial Innovation: How Agencies Can Leverage Technology to Shape the Future of Financial Services.” The Committee invited representatives to testify from the SEC, OCC, FDIC, CFPB, NCUA, and the Federal Reserve. The representatives fielded an array of questions focused on artificial intelligence, cryptocurrencies, and central bank digital currencies (CBDCs), and broadly focused on the need to balance technological innovation within the financial sector with managing risk.
On cryptocurrencies, congressional representatives posed questions on the nature of criminal activity among other risks. The discussion addressed bank risks related to crypto assets—while banks do not hold crypto assets, the representative from the Federal Reserve noted how banks may face liquidity risks when holding deposits from crypto-related companies. On CBDCs, the Committee asked for an update on the U.S. CBDC; the Federal Reserve representative mentioned the Fed’s current research on CBDC technologies but noted that the agency is still “a long way off from thinking about the implementation of anything related to a CBDC.”
On the topic of artificial intelligence, agency representatives discussed how banks are using the technology for fraud monitoring and customer service. The discussion addressed how artificial intelligence technology can create deepfakes using generative models to mimic an individual’s appearance or voice, and thus help scammers bypass traditional security checks. In response, some countries have implemented a secure digital ID that biometrically syncs to one’s smartphone, and the NCUA noted that it is currently evaluating this technology.
