Regulatory Ramblings: Episode 47 - The Biggest Bank Heist in History Is Coming with Linda Jeng

Regulatory Ramblings: Episode 47 – The Biggest Bank Heist in History Is Coming with Linda Jeng

June 21, 2024

Linda Jeng is a digital economy leader and strategist with over two decades of experience in FinTech, policy, and regulation. She is the founder & CEO of Digital Self Labs, a Washington D.C.-based Web3 advisory firm. Digital Self Labs is a cross-disciplinary advisory firm combining blockchain software expertise with policy and regulatory strategy.

Linda helps clients design and implement innovative solutions that empower individuals and enable interoperability, transparency, and efficiency in the financial and digital sectors.

She is also a renowned scholar and educator, with affiliations at Georgetown University Law Center, Duke University Law School, and the Bank for International Settlements. She conducts cutting-edge research and teaches courses on open banking, digital identity, and decentralized finance (DeFi). and has authored several publications and contributed to influential books on these topics. She is a frequent media speaker, commentator, and a Forbes contributor. Linda holds a J.D. from Columbia Law School and a master’s in EU and International Law from Université Toulouse Capitole. She speaks Mandarin Chinese, French, and essential German.

In this episode of Regulatory Ramblings, she talks to host Ajay Shamdasani about an op-ed piece she wrote, which Coindesk published entitled “The Biggest Bank Heist in History Is Coming.”

The discussion’s premise and focus are that regulators permit banks to tokenize financial assets such as bank deposits, U.S. Treasuries, and corporate debt. Yet, they want institutions to use permissioned networks rather than the decentralized blockchains that keep assets safe from hackers.

As Linda stated in her article: “In February, the Office of the Comptroller of the Currency’s acting head, Michael Hsu, announced plans for new rules on operational resilience for large banks with critical operations, including third-party service providers. Critically, what wasn’t discussed was that the rules would “treat the use of permissioned networks by the big banks to tokenize real-world assets and liabilities, an omission that neglects critical new vulnerabilities for the global financial system.”

A key theme of the conversation is that encouraging permissioned networks over permissionless blockchains will inevitably lead to cybersecurity attacks “on a scale previously unknown as the financial system moves to tokenize trillions of dollars worth of real-world assets and liabilities. The biggest bank heist in history is in the making.”

“By contrast, most successful crypto hacks usually involve centralized protocols where hackers only need to hack the admin keys of one or a few actors to gain control and steal digital assets. Similarly, permissioned networks are controlled by only a few parties so that they can be more easily hacked than blockchains maintained by thousands of validators. The concentration of attack vectors in the big banks that control these permissioned networks (or the central banks that control non-blockchain ledgers) is like sticking targets on their backs,” she said.

Linda discusses how she ended up in the legal profession, what drew her to digital assets as a scholar, and how she believes the worst attacks against banks are yet to come.