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This note summarizes the panels of federal regulators at ETA’s annual FinTech Policy Forum, which was hosted by Venable in our Washington, DC office. We provide key takeaways from discussions with (a) CFPB Director Rohit Chopra and (b) representatives from the Office of the Comptroller of the Currency, the Federal Reserve and the Consumer Financial Protection Bureau. This note reflects our understanding of the discussions and is provided for informational purposes only.
Main takeaways from CFPB Dir. Chat about Chopra:
- Concerns about data collection and use remain central to the CFPB’s concerns. Real. Chopra has personal concerns about data collection and how that data can be used by tech companies.
- Real. Chopra does not want to see the United States go down the path of a China-like payment system in which one or a few major players (e.g. Alipay) dominate the markets; having multiple channels is preferable.
- Real. Chopra is generally supportive of open banking, but doesn’t think the United States has the legislative framework in place to manage it from a regulatory perspective. Regarding open banking, Dir. Chopra acknowledged that there was no legal authority for the CFPB to create a UK-style open funding system. In the fall, the CFPB will complete the development of customer data rules that will give customers control over how their data is used. Real. Chopra worries about creating a “data underworld” where companies might try to grab data and use it for unrelated purposes.
- In the context of P2P payments, the Bureau does not have a solid answer as to whether liability should be shifted to the P2P platform for fraudulent transfers that have been authorized, but Dir. Chopra indicated that P2P platforms with more resources might be treated differently than those not backed by a major bank or similar entity. The CFPB is considering how ubiquitous one-time payments can be made in a way that addresses the root issues (i.e. fraud). Chopra said the Bureau could consider liability for P2P applications working on the tracks of a bank or other financial institution.
- The Bureau is trying to figure out what it wants to do with BNPL. Real. Chopra said the Bureau may use its oversight authority in the near future to begin answering some of his questions. Real. Chopra said the Bureau is beginning to think of BNPL the same way it thinks of credit cards and believes there should be some parity between the two products. Regarding BNPL, the CFPB is studying the use of the data and how it could be used to incentivize more buying and borrowing. The “repeatability” of BNPL is the distinguishing feature of BNPL; credit card companies don’t have nearly the same ability to influence transactions, Chopra says
- Stablecoins are an interesting idea, but Dir. Chopra doesn’t think the United States is ready for them yet. In general, however, Dir. Chopra suggested that Washington’s obsession with crypto is hampering broader thinking about the entire payments ecosystem.
General takeaways from the panel on banking regulators:
- All federal banking regulatory agencies continue to explore crypto risks and the role crypto plays in financial services.
- The OCC has gained significant knowledge in the area of crypto and will continue to study the sector, including reaching out to individual banks where appropriate.
- The OCC will continue to work on the process work of Interpretative Letter No. 1179 and will continue to clarify when and how domestic banks are permitted to engage in certain cryptocurrency, distributed ledger and coin activities. stable.
- The Federal Reserve focuses on crypto assets from various angles (i.e. monitoring financial stability); recent movements in the crypto market have shown the Fed that crypto assets are exposed to many of the same risks as traditional assets. The Fed issued a supervisory letter in August (press release) stating that institutions supervised by the Fed must notify the Fed of such activity before engaging in such activity (reflecting the OCC’s 1179 process).
- CFPB focuses on stablecoins/central bank digital currency; The CFPB primarily looks at assets that have the potential for broad and robust consumer adoption.
- The Bureau fears that with faster payments, there will be fewer “speed bumps”, which means a greater risk of fraud. The CFPB is considering safety and security in a real-time payment system (high focus area).
Bank and FinTech partnerships
- The OCC focuses on these partnerships; they are part of a broader theme of OCC’s recently released strategic plan to focus on digitizing products and services; partnerships between banks and non-banks play a key role in this digitization. Partnerships should focus on blocking and combating basic compliance, including partner due diligence, ongoing monitoring, consumer protection, customer service, and existing strategies.
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