After years of push-and-pull between federal regulating bodies, the U.S. Department of Treasury recently took the lead in establishing new regulations permitting FinTech companies to apply for specialized bank charters allowing them to do business on a national scale. However, other regulating bodies and state governments have pushed back against this move, citing consumer protection and regulatory confusion. Despite the uncertainty, one thing is clear: Both new opportunities and new restrictions are coming down the pike, and FinTech companies should prepare today to be ready for the changes of tomorrow.
Fighting for the Same Goal
The Conference of State Bank Supervisors (CSBS) is leading the pushback against the Treasury Department. Last year, the organization filed a lawsuit to stop the opening of special bank charters citing a regulatory nightmare at the state level, but ultimately, that lawsuit failed. The purpose of the lawsuit and the current objections raised by CSBS are simple. They want to see greater consistency in regulation. The Treasury Department does as well, but neither side can agree on how to make it happen.
The move by Treasury has opened a floodgate of regulatory questions. Just who is in charge of overseeing FinTech? FinTech firms currently face a regulatory minefield when attempting to do business in the U.S. because federal and state regulations often contradict one another, as do regulations from state to state.
For example, digital payment systems companies are classified as money service bureaus (MSBs) under the Federal Banking Security Act and must register with the Financial Crime Enforcement Network and obtain state licenses. However, cryptocurrency exchanges – which are also considered (MSBs) – are considered securities and are governed by the Securities and Exchange Commission. Companies that want to diversify service offerings find it cost prohibitive to enter new markets due to the complex web of regulations and a lack of a single governing body.
This complexity hampers innovation and keeps the U.S. a step behind firms on the global market who operate in countries that are friendly to financial technology.
What FinTechs Can Do Under Confusing and Complex Regulation
The regulatory puzzle won’t be solved overnight, but the industry does have friends in Washington, DC. Regulators and lawmakers want to see more innovation in FinTech and they want to remain competitive on a global scale. They see streamlining regulations under one body as the answer. Until then, bureaucracy and territorialism will continue, but a resolution will occur, likely sooner rather than later.
In the meantime, FinTech firms should be building teams that will allow them to act as soon as regulations change. As uniform regulations roll out, the companies who are prepared today will be poised to benefit immediately, snapping up more market share than competitors who drag their feet with a wait-and-see approach.
If your FinTech company is looking for talent who will help you grow under changing regulations, MoneyTech Search can help. Contact us today to learn more about the ways we can help you achieve your growth goals.