US Treasury FinTech report to make regulatory recommendations
A much-anticipated report from the US Treasury on regulatory reforms for the FinTech sector is set to recommend the use of regulatory sandboxes and fintech charters at both a state and federal level
A much anticipated report from the US Treasury on regulatory reforms for the FinTech sector is set to recommend the use of regulatory sandboxes and FinTech charters at both a state and federal level.
A preview of the report, the last of a series of studies commissioned by President Donald Trump via executive order, was given by Craig Phillips, counselor to Treasury Secretary Steven Mnuchin. Phillips indicated what the report would cover as well as outlining the need for reform.
“The increasing scale of technology-enabled competitors and the threat of disruption by new interests has raised the stakes for traditional firms to embrace innovation...and adapt a strategy,” he said. “Frankly we think it’s adapt or die. And with the implications of millennials and their behaviors and interests, these institutions must change a lot particularly with the presence of these disruptive forces.”
In the the interest of creating a level playing field, the report will explore the use of sandboxes which enable fintech pilots to be tested in a light touch regulatory environment prior to fuill launch and have been extensively used in other countries.
However, Phillips said that there needs to be more cooperation among regulators in order to fix what he described as "a fragemented system" make the use of sandboxes more consistent. The idea of establishing a global sandbox has been discussed by some regulators including the Financial Conduct Authority in the UK.
The US Treasury report will also revisit the more controversial idea of a federal fintech charter which was first proposed by the Office of the Comptroller of the Currency (OCC) but was widely opposed by a number of state regulators that threatened legal action against the OCC.
Phillips said the report will "explore the implications of federal charters" to promote "effective regulation of growing fintech firms" and the idea of regulators setting up their own innovation offices, something which the OCC and others have already done.
The report will include credit services, lending, digital financial planning and wealth management within its scope.
Other areas to be covered by the report include reducing regulatory overlap, tailoring rules based on size and complexity, using supervision to accelerate innovation and managing the growth in digital data management.