B2B Payments

Regulators Treading Slowly But Surely Into FinTech

FinTech has no doubt changed the face of the financial services industry in the U.S., but experts are beginning to question how it will impact regulation.

Reports in Reuters on Friday (May 26) explored how industry players are examining the future of financial regulation as FinTech continues its disruption.

“It has ended banking as we know it,” said chief business development officer of Digital Asset, Chris Church, at an International Monetary Fund meeting this year.

Another expert, Marco Santori, partner at law firm Cooley, spoke at another conference and said, “FinTech will hinder regulatory efforts because it is based on a decentralized model.”

“Regulators are likely to fail not only because they lack technical expertise regarding FinTech, but also because they have always been targeting nodes in the system and never had to face such a peer-to-peer network,” Santori added.

According to reports, this trend has the federal Office of the Comptroller of the Currency (OCC) examining how to navigate regulation in the age of FinTech. Last year the office published a report aimed to guide regulators in support of financial innovation and launched the Office of Innovation in an effort to better understand how that innovation is shaping the nation’s financial services sector.

The OCC also issued a draft licensing manual last March to help some FinTechs obtain a limited banking license. But those efforts, reports said, have led some industry players to call into question how large of a presence regulators should have among FinTechs that aren’t technically banks, with some critics claiming the OCC could stifle innovation by being too heavy-handed in the industry.

Only weeks after the OCC issued that manual, reports emerged that a lawsuit was filed against the office. The Conference of Bank State Supervisors launched the legal action, claiming the OCC is overstepping its authority over state-level regulators.

The lawsuit reflects a broader debate at play calling into question the balance between state and federal financial regulation, compounding broader debates over how these authorities should approach FinTech regulation overall.

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