The U.S. Government Accountability Office (GAO) has urged the Federal Deposit Insurance Corporation (FDIC) to coordinate more closely with other federal regulators to address risks linked to blockchain technology—warning that oversight has struggled to keep pace with the rapid growth of blockchain-based financial products.
In a June 8 letter to FDIC Chairman Travis Hill, GAO said it raised “priority recommendations” with the regulator in May of the previous year, including efforts to manage blockchain-related risks through better inter-agency coordination.
Key takeaways
- GAO says regulators have lacked an ongoing coordination mechanism for blockchain risk management, even as blockchain-based financial services expanded.
- The FDIC oversees stablecoin issuers that are subsidiaries of banks it supervises under the GENIUS Act.
- GAO recommends the FDIC rotate case managers assigned to supervised banks to strengthen supervision and protect independence.
- GAO pointed to crypto-linked bank failures in 2023 as raising questions about whether supervisory concerns were addressed promptly.
GAO flags blockchain oversight gaps
GAO placed blockchain technology on its “High Risk List,” characterizing it as an area where regulators have had difficulty overseeing blockchain-based financial products and the potential impact those products can have on U.S. markets.
In the letter, GAO said that in 2023 it found financial regulators “lacked an ongoing coordination mechanism for addressing blockchain risks,” and that blockchain-related financial products and services have grown substantially in the intervening period. GAO argued that establishing such a coordination mechanism would allow the FDIC and other regulators to identify risks and implement responses more quickly.
The regulator’s concern is not limited to one institution or one product. Instead, GAO framed blockchain as a cross-cutting risk category—one that requires regulators to share information and coordinate oversight approaches rather than addressing it in isolation.
GENIUS Act and why FDIC oversight matters
GAO’s push arrives as federal oversight of crypto-linked banking continues to take shape. Under the GENIUS Act passed last year, the FDIC is the main regulator for stablecoin issuers that operate as subsidiaries of banks it supervises.
That structure gives the FDIC a direct supervisory role in a segment of the crypto market that connects traditional banking regulation to blockchain-based settlement and tokenization. The GAO letter underscores the practical reality for regulated banks: even when token-related activity sits inside or alongside banking entities, supervisory expectations still fall largely on the banking regulators.
Separately, Senate lawmakers are reportedly looking to pass a bill intended to clarify how federal agencies would regulate the broader crypto market, reflecting ongoing legislative efforts to reduce uncertainty across the sector. The GAO letter complements that policy backdrop by highlighting operational and coordination issues inside the existing regulatory framework.
Earlier coverage from Cointelegraph noted FDIC moves aimed at regulating stablecoin issuers under the GENIUS Act, illustrating how the agency’s mandate is already expanding in step with stablecoin activity tied to supervised banks (FDIC moves to regulate stablecoin issuers under the GENIUS Act).
Case manager rotation and supervisory independence
Beyond coordination, GAO raised a governance recommendation aimed at strengthening supervision. It urged the FDIC to rotate case managers assigned to banks.
GAO said that in 2024 it found the agency did not require supervisors to rotate across different banks. In GAO’s view, the absence of such rotation “could compromise their independence and interfere with supervision outcomes.” GAO added that a rotation requirement “could mitigate threats to independence.”
The underlying idea is straightforward: closer, long-running supervisory relationships can potentially blur boundaries, while a rotation approach can help maintain objectivity and keep supervisory attention fresh. GAO’s recommendation suggests that even if regulators have the right policies on paper, staffing and supervisory processes can still affect how effectively risks are identified and addressed.
2023 bank failures put pressure on supervision
GAO also tied its recommendations to supervisory outcomes during the crypto-linked banking stress seen in 2023. The GAO letter said the failure of multiple crypto and technology industry-linked banks in 2023 “raised questions” about whether bank watchdogs took sufficient action to ensure institutions “promptly addressed supervisory concerns.”
The GAO cited the collapse of Silicon Valley Bank, Silvergate Bank, and Signature Bank—each of which had significant exposure to the crypto industry. Those failures occurred within less than a week in March 2023, in the fallout of FTX’s bankruptcy, which triggered major disruptions across crypto markets.
GAO’s point, as presented in the letter, is not that any single supervisory mechanism failed in isolation. Rather, it implies that when the sector’s risk profile changed quickly—especially amid high-profile market events—regulators needed faster, more coordinated action, along with supervision structures that preserve independence and responsiveness.
The GAO’s emphasis on both coordination and case manager rotation indicates a dual focus: regulators must communicate and align on emerging blockchain risks, and they must also ensure internal supervisory practices do not slow down decision-making or reduce the rigor of oversight.
What to watch next
For banks and stablecoin-related businesses operating within FDIC-supervised structures, the immediate question is whether the FDIC will adopt GAO’s recommendations on inter-agency coordination and case manager rotation—and how that translates into supervisory expectations. More broadly, lawmakers’ efforts to set a clearer federal framework for crypto regulation will determine whether coordination concerns can be addressed through policy design as well as through agency process.
