Innovation at the Speed of Markets: How Regulators Keep Pace with Technology

Digital Assets and Bank RegulationHouse Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence · 2026-03-26 · 119th Congress
The House Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence held this hearing to examine how the Federal Reserve, OCC, FDIC, and NCUA are adapting supervision to keep pace with AI, digital assets, and fintech partnerships. Begins at 0:03:25
Transcript
Highlights

Title

Bank regulators discuss AI, digital assets, and fintech supervision

Purpose

The House Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence held this hearing to examine how the Federal Reserve, OCC, FDIC, and NCUA are adapting supervision to keep pace with AI, digital assets, and fintech partnerships. Witnesses from the four agencies described their innovation offices, implementation of the GENIUS Act's stablecoin framework, and internal AI use, while Democratic members criticized the exclusion of the CFPB and raised concerns about deregulation and prediction-market insider trading. Begins at0:03:25

Who spoke

Chairman Bryan Steil (R-WI)0:03:25: Opened the hearing on regulatory adaptation to AI, digital assets, and real-time payments0:03:54; later questioned witnesses on concrete innovation actions and AI fraud-fighting uses0:29:180:30:34, and pressed Gallagher on a tonal shift at the OCC0:33:13.

Rep. Stephen Lynch (D-MA), Ranking Member0:06:31: Criticized the exclusion of the CFPB and SEC from the hearing and cited SEC dismantling of enforcement teams, FinHub closure, and CFPB layoffs of over 1,500 employees0:07:240:07:55; raised alarm about prediction markets, describing $18 billion in Kalshi/Polymarket volume and a trader winning 93% of bets on classified Iran operations0:34:530:36:06.

Rep. Maxine Waters (D-CA), Full Committee Ranking Member0:09:09: Objected to CFPB's absence and Acting Director Vought's failure to testify0:09:09; questioned Gallagher on ethics violations and whether OCC is increasing oversight of employee trading on prediction markets tied to the Venezuela strike0:44:540:47:59.

Rep. French Hill (R-AR), Full Committee Chairman0:10:20: Framed the hearing around whether agencies have structure and expertise to keep pace with innovation0:10:27; asked all witnesses about state-bank-supervisor coordination and tokenized deposits0:41:000:43:42.

Randall Guynn, Federal Reserve Board Director, Division of Supervision and Regulation0:12:23: Described the Fed's new policy to facilitate innovation consistent with safety and soundness0:12:53 and efforts to make supervision more transparent, including releasing operating manuals0:14:13; said the Fed rescinded SR 23-7 after finding the novel activity program inconsistent with its innovation policy1:04:06, and confirmed CBDC (retail and wholesale) work has ceased per Chair Powell1:24:301:25:07.

Jay Gallagher, OCC Senior Deputy Comptroller and Chief National Bank Examiner0:16:04: Said the OCC supervises over 1,000 institutions holding $17.9 trillion in assets0:16:31, and issued a notice of proposed rulemaking implementing the GENIUS Act0:19:00; said Comptroller Gould has stated a failure to innovate is itself a risk, contrasting with prior administration's focus on preventing downside risk0:33:32.

Ryan Billingsley, FDIC Director, Division of Risk Management Supervision0:20:54: Said the FDIC is piloting AI internally and rescinded a prior crypto-activity notification requirement for banks0:23:06; described a multi-year IT modernization project expected to be mostly complete "in a couple years"0:24:041:18:24.

Amanda Parkhill, NCUA Acting Director, Office of Examinations and Insurance0:24:49: Described NCUA's Deregulation Project with 15 pending proposed rulemakings0:25:10 and roughly 4,300 federally insured credit unions serving 145 million members0:25:37; noted the GENIUS Act stablecoin rule comment period closes April 130:28:08.

Rep. Bill Foster (D-IL)1:06:16: Asked about Treasury's mobile driver's license/digital ID recommendation for KYC compliance under the GENIUS Act1:06:46; warned of accelerating bank-run risk from agentic AI, citing Silicon Valley Bank's $40 billion outflow in two days1:08:461:09:10.

A committee member (self-recognized chair segment)1:11:28: Emphasized regulatory consistency and questioned Guynn on the Fed's lack of a formal innovation office and how examiners are trained on emerging risk1:12:261:13:11.

Rep. Sylvia Garcia (D-TX)1:16:06: Criticized CFPB's absence amid $100 million in canceled contracts1:17:00; pressed Billingsley on the FDIC's IT modernization timeline and Guynn on model risk guidance updates last done 15-18 years ago1:17:421:18:53.

Rep. Warren Davidson (R-OH)1:21:30: Questioned Guynn on inconsistent Fed master account decisions, citing Custodia Bank's denial versus Kraken's approval by the Kansas City Fed1:22:111:22:59; asked about central bank digital currency status under Trump's executive order1:24:04.

Rep. Ro Khanna / Rep. LaCardo (D-CA)1:26:58: Raised concerns that excluding ACH payments from the Fed's proposed "skinny" master account would undercut access, citing $93 trillion in 2023 ACH volume and industry-proposed risk mitigations like pre-funding1:28:111:29:35.

Rep. Troy Downing (R-MT)1:31:31: Asked all four witnesses about staffing expertise, regulatory sandboxes, and GENIUS Act implementation status in rapid succession1:32:191:33:341:35:29.

Rep. Ayanna Pressley (D-MA)1:36:38: Highlighted FedNow as a tool for workers to access pay faster and for small banks/credit unions to compete with fintech apps like Klarna and Affirm1:37:331:38:01.

A subcommittee member closing the hearing1:40:44: Introduced the AI Plan Act for a whole-of-government AI threat strategy1:41:12; asked Gallagher about updating AI model risk guidance (SR 11-7) unchanged for nearly a decade1:43:20, and Billingsley about detecting compromised foreign AI models like DeepSeek1:44:30.

Key moments

Lynch detailed prediction-market growth from about $2 billion to $18 billion (Kalshi and Polymarket), noting a single trader won roughly 93% of five-figure bets on classified US/Israeli military operations against Iran, often placed hours before strikes occurred0:34:530:36:06.

Lynch said six newly created accounts made about $1 million correctly betting the US would strike Iran before a deadline, and that Israeli investigators indicted two individuals, including a military reservist, for using classified material to place bets0:36:30.

Guynn said he wasn't sure prediction-market growth "rises to the level of systemic" concern for the Fed, and both Guynn and Billingsley declined to say whether the activity should be regulated as gambling, deferring to the SEC or CFTC0:37:380:38:180:38:29.

Waters connected Trump's disclosed pre/post-strike conversations with oil companies before the Venezuela military action to a "familiar pattern" of insider profiting, but Gallagher said the OCC has no rules on prediction markets and would defer such issues to ethics officials0:45:220:46:59.

Guynn confirmed the Fed rescinded SR 23-7 (the novel activity supervision program tied to "Operation Choke Point 2.0") in August, folding crypto/fintech oversight into standard supervisory processes1:02:331:04:06.

Davidson pressed Guynn on why Custodia Bank was denied a Fed master account while the Kansas City Fed recently granted one, in a "skinny" form, to Kraken — Guynn acknowledged the process is "discretionary" and said Congress could consider making it mandatory1:22:321:22:59.

Gallagher cited OCC's supervision of over $17.9 trillion in bank assets (two-thirds of US commercial banking assets) and more than $90 trillion in assets under administration0:16:31.

Sherman raised a Meta study finding roughly 10% of its annual revenue (~$16 billion) derives from ads for scams and banned goods, with up to 15 billion high-risk scam ads daily0:57:530:58:15.

Sherman challenged Gallagher on whether AI lending models risk encoding historical racial bias into future credit decisions, referencing name-based hiring discrimination studies0:58:470:59:51.

Foster warned that "bank runs at the speed of agentic AI" could replicate Silicon Valley Bank's $40 billion two-day outflow in minutes, and asked regulators whether real-time solvency monitoring tools are ready — Parkhill cited playbooks and liquidity facilities but did not confirm real-time detection capability1:08:461:10:471:11:01.

Metadata

CommitteeHouse Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence
Chamber / CongressHouse · 119th Congress
Date2026-03-26
TypeHearing
Witnesses
Mr. Jay Gallagher — Senior Deputy Comptroller and Chief National Bank Examiner, Office of the Comptroller of the Currency
Mr. Ryan Billingsley — Director, Division of Risk Management Supervision, Federal Deposit Insurance Corporation
Mr. Randall Guynn — Director, Division of Supervision and Regulation, Federal Reserve Board
Ms. Amanda Parkhill — Acting Director, Office of Examinations and Insurance, National Credit Union Administration
Videoyoutube
Transcript358 caption blocks · 16,620 words · 1:46:21 runtime
EventCongress.gov 119110