US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization

Crowdfund Insider | | Jul 31, 2018

US treasury - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory HarmonizationThe US Department of the Treasury has published its long anticipated report on Fintech. This is the fourth in a series of reports emanating from Treasury that address emerging innovations in finance.

Secretary Steven T. Mnuchin commented on the reports release stating “American innovation is a cornerstone of a healthy U.S. economy.”

“Creating a regulatory environment that supports responsible innovation is crucial for economic growth and success, particularly in the financial sector. America is a leader in innovation. We must keep pace with industry changes and encourage financial ingenuity to foster the nation’s vibrant financial services and technology sectors.”

The report seeks to identify areas within the regulatory landscape that could be updated to better empower changes in financial services to keep the US competitive with other jurisdictions that are doing the same. Treasury says the document benefited from a wide range of stakeholders focused on consumer financial data aggregation, lending, payments, credit servicing, financial technology, and innovation.

See:  Nov 20, 2017: NCFA Canada Welcomes Competition Bureau’s recommendations to encourage competition and innovation in Canada’s financial services sector

Overall, Treasury made 80 different recommendations for the government to consider. The authors note that rapid advances in technology, the digitization of the economy and an ample supply of risk capital is fueling Fintech innovation. Treasury estimated that the flow of investments into global Fintechs is very large and that U.S. firms accounted for nearly half of the $117 billion invested from 2010 to 2017.

Treasury’s recommendations broadly covered the following four categories:

  • Adapting regulatory approaches to changes in the aggregation, sharing, and use of consumer financial data, and to support the development of key competitive technologies
  • Aligning the regulatory framework to combat unnecessary regulatory fragmentation, and account for new business models enabled by financial technologies
  • Updating activity-specific regulations across a range of products and services offered by nonbank financial institutions, many of which have become outdated in light of technological advances
  • Advocating an approach to regulation that enables responsible experimentation in the financial sector, improves regulatory agility, and advances American interests abroad.

Importantly, Treasury tackled the biggest problem in regard to fostering Fintech innovation. The problematic regulatory fragmentation that has undermined the ability for Fintechs to provide improved services to consumers and businesses while harming global competition.

The report states:

“Many statutes and regulations addressing the financial sector date back decades. As a result, the financial regulatory framework is not always optimally suited to address new business models and products that continue to evolve in financial services. This has the potential negative consequence of limiting innovation that might benefit consumers and small businesses. Financial regulation should be modernized to more appropriately address the evolving characteristics of financial services of today and in the future.”

Treasury advocates that harmonization of state oversight would be beneficial in encouraging emerging Fintech services. The document also encourages the Office of the Comptroller of the Currency (OCC) to “further develop its special purpose national bank charter” or Fintech Charter as it is popularly called. The OCC Fintech Charter has been languishing for years now as special interests have blocked its advancement.

See:  NCFA: Canada Needs a Harmonized Securities Environment as Current Provincial Approach is a Fintech Innovation Killer

Treasury recommends that the OCC “move forward with prudent and carefully considered applications for special purpose national bank charters.” But the report adds that OCC special purpose national banks should not be permitted to accept FDIC-insured deposits.

Treasury explains a portion of the enigma;

“Nonbank lenders that operate in multiple states must acquire lending or credit licenses for each applicable state. As a result, geographic expansion can only generally be accomplished through repeated licensing efforts, each with a state-specific regulatory regime.”

A Long and Complex History of State and Federal Regulation in Financial Services

This unnecessary governmental overlap harms consumers and adds time and cost to aspiring Fintech firms that may challenge incumbent financial institutions. In fact, Treasury puts a number on the cost to businesses of $1 million to $30 million – a lot of money for an entrepreneurial firm. Additionally, a portion of this cost continues in perpetuity as firms must constantly monitor ever evolving state regulations and move quickly to comply when one changes.

“These cumulative challenges of operating in the state-based regulatory regime result not only in excessive regulatory costs, but also constrain the ability of nonbank firms, including start-ups, to innovate and to scale nationally.”

Treasury recommends that regulatory modernization must take place and provides their opinion on a solution. While recognizing that state based regulators play an important role, the inertia exemplified by the current regulatory morass must be addressed within the next few years:

“Treasury supports state regulators’ efforts to build a more unified licensing regime and supervisory process across the states. Such efforts might include adoption of a pass-porting regime for licensure. However, critical to this effort are much more accelerated actions by state legislatures and regulators to effectively reduce unnecessary inconsistencies across state laws and regulations to achieve much greater levels of harmonization. Treasury recommends that if states are unable to achieve meaningful harmonization across their licensing and supervisory regimes within three years, Congress should act to encourage greater uniformity in rules governing lending and money transmission to be adopted, supervised, and enforced by state regulators.” [emphasis added]

Addressing the nagging issue of Madden v. Midland, a problematic legal challenge that impacts online lenders, Treasury “recommends that Congress codify the “valid when made” doctrine to preserve the functioning of U.S. credit markets and the longstanding ability of banks and other financial institutions, including marketplace lenders, to buy and sell validly made loans without the risk of coming into conflict with state interest-rate limits.”

See:  Ontario Securities Commission “Doesn’t Really Know What’s Going On” in Blockchain Fintech, Says Lawyer

Brian Peters, Executive Director of Financial Innovation Now – an entity that represents big US tech and their interests in pursuing Fintech services, had this to say about the Treasury Fintech report;

“Financial Innovation Now advocates for smart federal policies that promote technological innovation in financial services, and we believe the Treasury Department’s report is a strong step towards modernizing antiquated financial regulations. From secure mobile payments to fast and accessible credit, FIN member companies are empowering consumers and small businesses with helpful financial tools. We look forward to working with Congress and federal financial regulators on these necessary policy updates.”

Continue to the full article --> here


NCFA Jan 2018 resize - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory HarmonizationThe National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, STO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: ncfacanada.org

Click for News:

latest news - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization

 

Crowdfund Insider | JD Alois | June 20, 2019 The Securities and Exchange Commission (SEC) has published a statutory report on Regulation Crowdfunding commonly referenced as Reg CF. The mandated report must be forwarded to Congress three years after Reg CF rules became effective (May 2016). Reg CF is the smallest of three federal “crowdfunding” exemptions allowing issuers to raise just $1.07 million from both accredited and non-accredited investors. According to the report authors: “the number of crowdfunding offerings, as well as the total amount of funding during the considered period, was relatively modest.” The report tallies activity under Reg CF from May 2016 to December 31, 2018. At the end of the period, there were 45 active Portals and 9 Broker-Dealers which had participated in at least one Reg CF offering. See: $5 million Equity crowdfunding extended to private companies Early-stage Investing – The Public gets a Seat at the Table Three platforms accounted for two-thirds of all initiated offerings and proceeds raised. SEC: the number of #RegCF #crowdfunding offerings, as well as the total amount of funding during the considered period, was relatively modest Click to Tweet According to the SEC: Between May 16, 2016, and December 31, ...
Read More
RegCF SEC report - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
Chambers Pivot Industries | Greg Chambers | June 20, 2019 "All I need is an investor, and I’m ready to go," she says. I'm sitting in front of a passionate entrepreneur who knows I've successfully raised millions of dollars for various businesses. After hearing her story, what I'm about to say won't be what she wants to hear, but it's true. Funding isn't her problem. There's more money out looking for a home than there are good ideas to fund. The problem, I tell her, is she hasn't decided if she wants to build a company or master the growing seed and startup capital environment. Lessons from the past I was in her seat in the late 1990s shopping my big idea from investor to investor. Eventually unsuccessful, I was forced to abandon my startup and find a job. I took two big lessons from that experience. One is that if I wanted to get a company off the ground, I needed to get much better at selling a vision to investors. Second, based on the questions the investors were asking, I needed far more evidence from customers that my idea was the right one before they’d invest. Years later, ...
Read More
hunter to prey - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
Luge Capital | Karim Gillani | June 2019 Intro:  NCFA Fintech Confidential spoke with some of Canada’s experienced fintech investors, on their background, how Canada has evolved, what we should be doing, advice to fintech founders and what keeps them awake at night.  This is part 1 of a 4 part series.   What is your background, and how did you come to co-found Luge Capital? Karim:  My background is in fintech, mobile tech, engineering, finance and strategy. Prior to Luge, I was at PayPal, leading M&A activities in Canada. I joined PayPal through its $890M acquisition of Xoom, a renowned cross-border remittance company, where I started the Corporate Development practice. I have an Engineering degree from the University of Waterloo, a Master of Finance degree from the University of London and a Master of Laws from the University of Toronto. Luge Capital was the byproduct of highly motivated LPs, and a recognition that fintech venture capital needed a kickstart at the early stages. David Nault and I co-founded Luge in early 2018 with a new model to seek out entrepreneurs in the US and Canada that not only had a drive to take over the world, but also built their ...
Read More
luge capital - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
CDL Team | June 18, 2019 The Libra Association announces a new initiative with the goal of increasing access to financial services and fostering financial inclusion around the world TORONTO, CANADA – Today, Creative Destruction Lab (CDL) – a not-for-profit seed-stage startup program – announces that it will be a Founding Partner of the Libra Association. CDL is keen to contribute to the success of the Libra initiative as the sole Canadian organization and academic institution in the Libra Association at present. The Libra Association will create Libra, a simple global currency and financial infrastructure that can empower billions of people. Libra will be built on a secure, scalable, and reliable blockchain; and it will be backed by a reserve of assets designed to give it intrinsic value. The Libra Association will govern the infrastructure and manage and evolve this new ecosystem. Libra will enable developers and businesses to build inclusive new financial service products for people around the world. See:  Facebook’s Libra Cryptocurrency: Everything We Know At this time, CDL is the sole academic Founding Partner of the Libra Association. The initial group of organizations that will work together on finalizing the association’s charter include: Payments: Mastercard, PayPal, PayU ...
Read More
CDL libra - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
PC Mag | Rob Marvin | June 18, 2019 Facebook's Libra Cryptocurrency: Everything We Know Facebook's big blockchain play, consisting of the Libra coin, the nonprofit Libra Foundation, and Facebook's Calibra wallet, will create a crypto-based payments ecosystem across Facebook, Messenger, WhatsApp, and beyond. Facebook's long-rumored cryptocurrency finally got its big debut, and it's called Libra after all. Facebook today released a lengthy white paper, along with a post from Mark Zuckerberg and another from VP of blockchain David Marcus, announcing the ambitious crypto initiative and all that comes with it. The open-source Libra cryptocurrency and blockchain will be governed by the nonprofit Libra Association, while a new Facebook-owned subsidiary called Calibra will release a wallet for Libra tokens and ultimately other banking and finance products—a move that could turn Facebook into a financial services giant in addition to a social and advertising one. See:  Facebook’s Cryptocurrency: Great Idea, Wrong Company While the public launch of Libra won't happen until the first half of 2020, the developer testnet of the Libra blockchain is live today. There will also be a new programming language called Move for developers to build distributed applications atop the Libra blockchain, though Facebook said neither itself ...
Read More
facebook launches libra - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
3iQ and Mavennet | Fred Pye and Kesem Frank | June 18, 2019 Stablecoins are now a necessary step to mass adoption of cryptocurrencies, as proven by the way they’ve been used to hedge the massive volatility of the market over the past couple of years. Their simple premise enables the seamless pairing of crypto-to-fiat pegged cryptocurrency. It might sound overly simplistic, but this straightforward innovation has spurred the growth of a new crypto asset class that measures in billions of dollars in aggregate market cap (e.g. Tether, USD Coin, TrueUSD, Paxos and Gemini Dollar). As much as this asset class is still gaining momentum driven by the current and common use case, the potential of stablecoins goes well beyond the tactical value of a trading tool. Stablecoins are strategically important because they represent a bridge between legacy fiat-based systems and the new digital and decentralized currency underpinnings we collectively call “blockchain.” The dream isn’t necessarily a prediction or extension of the purist’s vision   Bitcoin - blockchain’s earliest network - was born from tumultuous years in the traditional financial system. These were years defined by mistrust; not just towards the people at the helm of the financial system, but ...
Read More
stablecoins  - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
CNBC | Kate Rooney and Hugh Son | June 10, 2019 Mobility giant Uber is looking to accelerate the creation of financial products with a new fintech outpost in New York, according to people with knowledge of the plan. The ride-hailing company is aiming to hire several dozen engineers and product managers this year, and the New York team could eventually exceed 100 workers, said the people, who declined to be identified speaking about Uber’s plans. Uber, fresh from its IPO last month, is looking to tap New York’s talent pool, which is deeper when it comes to fintech and bank workers than its hometown of San Francisco. By building out its financial ecosystem, the company can increase its lead over rivals like Lyft. The efforts are likely to be focused on ways to increase engagement and loyalty to the Uber platform, according to people who attended a recruitment event earlier this year. Payments chief Peter Hazlehurst and top engineer Johnie Lee spoke at the event, held at Uber’s New York offices, the people said. There are many possible payment and lending innovations Uber could come up with: It has 93 million active users globally, most of whom use linked ...
Read More
Dara Khosrowshahi CEO uber tech - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
Schulte Research | Paul Schulte | June 17, 2019 Digital banking finally arrives in HK --all in one go! Be careful what you wish for — you might get it.  Hong Kong People have been kvetching for years about the poor quality of banking services. Now, they will have a deluge of ultra-efficient and essentially free new services. These services will offer strictly online banking services without branches and ALL of them have very deep pockets. The first batch below, which I will enumerate in a moment, have capital to burn of about USD 250 million. This can go a long way in eroding the highly profitable cartel of HSBC and Hang Seng Bank.  Hang Seng Bank has consistently had among the highest ROE globally north of 20-21%. And its revenue per customer has been among the world’s highest as well. HSBC owns more than 40% of HSB, so it has been a cash cow for the bank. Hong Kong is really the center of profitability for HSBC, since its ROE for commonwealth countries is the single digits and it has basically given up on the US financial market.  It’s European business, like all Euro banking franchises, is in the ...
Read More
global network and points of presence maps - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
Forbes | Enrique Dans | June 17, 2019 All the signs are that Facebook is about to launch its cryptocurrency on June 18, a project known internally as Libra, and that soon, apparently, we will all be using. So what are the implications of a company with 2.4 billion users launching its own currency? Strategically, the movement makes sense for Facebook: at a time when many question the its dominance of social networks and when a majority of its own shareholders say they want to see the back of Mark Zuckerberg, the company announces a very ambitious project of universal appeal giving it a central role in the world economy, in the wake of innumerable cryptocurrency projects of dubious legality, irresponsibly speculative and wasteful in terms of energy, aimed among others at people in countries with unstable currencies or limited banking penetration. As Jack Dorsey has said, this maybe the perfect moment to create a universal currency for the Internet era, reflecting the trend toward a universalization of the world. However, what is less clear is whether this currency should be in the hands of Facebook. See:  FaceCoin: Here’s What Facebook Could Build In Blockchain And Cryptocurrency Technically, the project ...
Read More
mark Z. facebook - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization
PATIO TIME! Join the National Crowdfunding & Fintech Association of Canada, Spaces, Gowling WLG, LoanConnect, FrontFundr, Exponential Ventures, CoinChange, United Craft, Highlander Brew, partners and Canada's leading Fintech & Funding community in the heart of trendy Queen West for a celebratory night and prime networking mixer. Interested in disrupting the finance industry, raising capital or participating in Canada’s growing alternative investing and fintech sectors? Here's a perfect opportunity to connect with emerging fintech, blockchain, crypto, AI, stealth and marketplace startups and experts, strategize with partners, pitch investors and mingle with Toronto’s burgeoning fintech ecosystem. ANNUAL SUMMER KICKOFF EVENT Date:  THURSDAY, JULY 11, 2019 When:  Registration opens 5:30PM to 9PM+ Venue:  SPACES, 7th Floor Loft & Rooftop Patio Where:  180 John Street, Toronto, ON M5T 1X5 TICKETS - GET'M BEFORE THEY'RE GONE! $25 Early; $35 Standard; $50 Late All tickets include entrance to private event, drinks, food, lots of fun and prime networking Taxes and fees extra. No refunds after Jul 4. Ticket transfers ok. Want to pay in Crypto?  Email us for an address info@ncfacanada.org If it rains, we're covered literally inside. Checkout photos from last year's Summer networking event here and the year prior here This event is for ...
Read More
NCFA Summer Kickoff Event Jul 11 v3 - US Department of Treasury Report on Fintech Makes Recommendations to Boost Innovation, Advocates on Behalf of Regulatory Harmonization