The Risk of Cybersecurity Attacks in Tokenization: Why Regulators' Emphasis on Permissioned Networks is Dangerous

The Office of the Comptroller of the Currency's acting head, Michael Hsu, has announced plans for new rules on operational resilience for large banks with critical operations, but has not discussed how these rules will treat the use of permissioned networks by big banks to tokenize real-world assets and liabilities. The top four custodian banks alone now safeguard over $108 trillion in assets, which are in the process of being tokenized by big banks. Regulators acknowledge this trend, but mostly encourage the use of permissioned networks over permissionless blockchains, which will inevitably lead to cybersecurity attacks on a scale previously unknown. The concentration of attack vectors in the big banks that control these permissioned networks is like sticking targets on their backs.