Brian Brooks from the Office of Comptroller of Currency has said that Decentralized Finance is paving the road for self-driven banks.
Brooks pressed on the need to tweak the banking regulations in the digital age driven by algorithms.
OCC’s Brian Brooks Thinks DeFi can root out human error, bias, and fraud in traditional banking
Brooks revealed her thoughts in an opinion piece published by the Financial Times on Tuesday. He compared the self-driving banks to the autonomous vehicles, which highlighted that the current banking regulations are important as they prevent human failings.
“How different would banking in the US be today if regulators, bankers, and policymakers were as bold as carmakers ten years ago?” said OCC’s Brian Brooks. He hinted that bold decisions in the banking industry could have been instrumental in massive transformation which could have led the financial sector on a different level of innovation altogether.
Brook was seemingly confident about the capability of banking regulators to learn and reconfigure the algorithms to curtail bias and fraud of any kind. As per Brook, appraising the algorithms would be easier than trying to root issues from the human bankers.
Brooks highlights that DeFi leverages blockchain technology to render services without any human intervention in his letter. The DeFi projects enable the users to trade without brokers with the use of lending protocols that do not need any credit committees or loan officers. DeFi creates a money market through algorithms that derive interest rates without the need for traditional banks. Since DeFi curtails the need for human intervention, it is paving the way for self-driving banks, just like self-driving vehicles.
Further, Brooks added that like self-driven vehicles have certain challenges, similarly self-driven banking also poses some threats and challenges. Management of loan collaterals, Asset Volatility, and liquidity risks are some of those. Thus, there is a need for federal regulators to decide a regulatory scheme for self-driving banks.
Brook was previously the Coinbase legal team leader and transitioned to the role of US bank regulator. He has also played a crucial role in integrating the cryptocurrency technology in the national payments systems.
Brook further highlighted that he is optimistic that banks van usher into the future to eliminate error and stop discrimination and “achieve universal access for all.”
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