Digital assets and blockchain technology continue to infiltrate the financial services sector at a growing rate. Blockchain or distributed ledger technology (DLT) is being tested or used to issue securities and currencies and manage back-office operations.
In light of this reality, the Federal Reserve Bank of Boston has partnered with the Prysm Group on the role of “supervisory nodes in the blockchain network,” according to an email from Prysm.
Prysm has commenced joint-research to assess the “potential role, structure, and benefits of supervisory nodes in blockchain networks.”
Prysm is “research-driven economic consulting firm” that focuses on blockchain and distributed ledger technology (DLT). The firm was founded by two Harvard trained economists with PhDs in Business Economics; Dr. Cathy Barrera and Dr. Stephanie Hurder.
Prysm is currently soliciting a request for comments from a wider audience regarding the role of supervisory nodes as it seeks to better clarify the mission of monitoring these networks.
Supervisory nodes are currently being defined as being able to monitor, audit, and keep a public account of user activity. These nodes may also be able to flag, hold or stop transactions. For a regulator, these nodes may provide valuable insight into the digital asset sector which may grow to the point where crypto becomes systemically important. Currently, the crypto market is relatively small but that may change.
The recent announcement by Facebook regarding its interest in launching a non-sovereign global cryptocurrency has caused regulators around the world to take note. Facebook’s reach is large enough where it may be able to challenge certain national currencies.
The Fed is not alone in its interest to launch regulatory nodes to keep an eye on blockchain-based transactions. Recently, the Securities and Exchange Commission issued an RFQ for service providers to create a node for the securities regulator to monitor crypto.