Regulation

Shutdown Impacting FinTech Firms, Financial Regulations

FinTech Regulations

Count the FinTech sector — and regulation of that sector — among those impacted by the government shutdown that has roiled Washington through the past several weeks.

As Roll Call reported late last week, the shutdown is creating “serious problems” for FinTechs, with a slowdown across dealmaking and supervision in the sector. That comes as the U.S. Securities and Exchange Commission (SEC) is hobbled by a lack in staff on site to help process registration statements tied to initial public offerings (IPOs). A backlog may mount, as well, said Roll Call, as there are any number of smaller firms that want to come to market with mini-IPOs through Regulation A+. Firms that see such smaller listings include crypto and blockchain-related companies.

The publication noted, too, that online lenders are impacted by the lack of regulatory oversight. Consider the fact that the SEC has to give permission for those companies to sell their loans to investors — and may have to tap financing conduits such as the credit markets to run day-to-day operations. Of course, those same online lenders are typically  the companies that may serve as “emergency backstops” for federal workers who need to meet their own financing demands — in other words, paying bills.

Shutdown Hits Efforts Vs. Financial Crimes

The National Review reported that the shutdown has hit anti-money laundering activities and activities by the Financial Crimes Enforcement Network (FinCEN). There is staff on site to run IT systems that are tied to suspicious activity reports done by financial firms.

Beyond the federal government activities, there still remains at least some regulatory and legislative movement at the state and local level.  In Wyoming, the state legislature has passed two bills in the house, focused on regulation of blockchain and cryptocurrencies.

One bill embraces tokens, and states that “the open blockchain tokens governed by this act do not constitute securities because a person who is sold a consumptive open blockchain token cannot receive a cash payment or share of profits from a developer or business, but will instead receive a fixed amount of consumable services, content or property.” The other bill helps create regulatory sandboxes, and seeks to bring FinTech services to the state.

Elsewhere, in Europe, auditors said at the end of last week that the European Union is falling short in efforts to stop misuse of funds — so much so that only 15 percent of hundreds of millions of euros are recovered annually.

The estimate comes as a report has said that misused funds in 2018 were 391 million euros, and the union’s anti-fraud investigative office indicted EU member states only 45 percent of the time, and much of the misused funds went to politicians and their associates. The auditor’s report has advocated for the creation of a prosecutor’s office to eye spending, and the office would be created in 2021.

Over the weekend, it was reported that China’s own financial regulator levied more than 3,800 penalties last year against banking firms (totaling more than 30 companies), which stands as a record.

The fines came amid lending to the real estate sector, and where authorities had said they would step up efforts to reduce rule-breaking property lending where supervision is lacking, and where real estate speculation is boosting stock and real estate bubbles.

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