U.S. Treasury FinTech report: Regulation in need of extensive changes

The U.S. Department of Treasury's recent report on FinTech regulation and innovation generally finds that while financial institutions and tech firms have embraced the shift to digital processes to meet customer demands, the regulatory environment lags.  Recommendations in the report aim to further enable, sustain, and advance the digital transformation of financial services.

Two key elements are present throughout the report:

  1. Treasury believes that the current U.S. regulatory framework is not conducive to innovation, and changes are necessary to foster innovation; and
  2. Treasury encourages the U.S. to learn from approaches from certain other jurisdictions with respect to regulating innovation in financial services.

On this second element, examples cited in the report include UK Open Banking and the Hong Kong Monetary Authority’s recent launch of an open API framework for the Hong Kong retail banking sector. Just one week after publication of the report, the Consumer Financial Protection Bureau (CFPB) announced that it would be collaborating with 11 financial regulators to create a Global Financial Innovation Network and, possibly, a “global sandbox” related to that effort.

The recommendations in the report potentially affect a wide range of entities, including bank and non-bank financial services entities, technology platform providers, third-party servicing providers to these entities, among others. We advise these entities in many related pursuits, including licensing, the Office of the Comptroller of the Currency’s (OCC) chartering, legislative and regulatory outreach, due diligence, and state and federal regulatory advice.

For more on the report, take a look at this article on HL Engage (free registration required). The article includes a link to our client alert which explores the report's key thematic areas.

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