The U.S. House Committee on Financial Services announced that it will hold a hearing during the current meeting of the U.S. federal government's legislative branch to discuss how to update the regulatory approach for fintech.
The committee is made up of representatives from both parties. It has jurisdiction over laws affecting banks, credit unions, savings associations, securities firms, insurance companies and other entities that participate in the country's financial system.
Such panels frequently include experts on international tax policy as well as experts on consumer protection law who are knowledgeable about how fintech innovations are impacting consumers across America.
Keeping up with regulations while promoting innovation and competition
According to the oversight plan, "The Committee will continue to review the existing regulatory framework for licensing and overseeing fintech products and services, and will examine what legislation may be needed to properly oversee fintech companies operating within the rapidly evolving intersection of technology and finance."
There are many things that need to be considered when updating regulations, such as protecting consumers from fraud and abuse while promoting innovation and competition.
The discussions will be overarching the entire fintech ecosystem, including cryptocurrencies, payments, artificial intelligence, cybersecurity, and data.
Understanding the cryptocurrency part of the discussions
The planned debate on the cryptocurrency section will cover: "the need for clear guidelines and regulations for crypto assets, stable coins, digital currencies, and related products."
The committee also plans to review the U.S. Securities and Exchange Commission's (SEC) extent to which existing laws apply in this new technological sphere or whether new rules are necessary to enhance clarity for "issuers and investors."
Clear rules will help to create growth in the crypto market by providing much-needed information for participants. With the upcoming debate on cryptocurrency regulations, the panel will have an opportunity to specify how it plans to treat digital currencies in order to boost investor confidence in the U.S.
Coinbase also proposes a different solution to create a brand new regulatory agency. They want it to govern the digital currency industry instead of the SEC, which has previously regulated the legacy financial services sector. Imagine something called the Crypto Exchange Commission (CEC).
An examination of how to regulate artificial intelligence in finance
This part of the panel's oversight plan points to another essential aspect the committee intends to cover: how fintech firms are utilising artificial intelligence (AI) to provide financial services. The committee wants to "evaluate the challenge of how to assess, identify, and regulate bias in algorithms used by financial institutions for consumer loans and other products."
Using AI for credit decisions brings up some issues concerning transparency and accountability. The purpose here seems to be asking what rules should apply regarding the lack of regulation for this type of technology, especially if bias influences the results provided by algorithms without consumers being aware.
The House committee plans on considering whether any new regulatory approach would actually help innovation or slow down development within an industry so vast with potential growth opportunities around every corner.
Regulating consumer protection issues that arise from big data
Also on the agenda is an examination of data and security risk management frameworks. The session should highlight various ways through which financial technology entities handle the information they've collected about their customers. It's believed that it may be helpful if there were stricter rules and regulations for protecting Americans' personally identifiable information (PII).
It's also possible that the panel could explore options for how to better safeguard people from identity theft and financial crimes, giving end-users peace of mind, knowing their information is being kept safe.
The recently proposed Secure and Protect Americans' Data (SPAD) Act may be one of the topics discussed at this part of the hearing, which has been referred to as a bill aimed towards requiring companies to report data breaches involving sensitive personally identifiable information to provide notification within 30 days after discovering such a breach.
The timing for discussing new fintech regulations couldn't be better
It has been a goal of some lawmakers on Capitol Hill for years now to develop an appropriate regulatory framework in regards to financial technology that balances consumer protection with economic development.
The current technological revolution in the financial sector is having profound implications across various subdivisions of the industry, from lending to payments, banking and investments.
What will the future hold for financial technology and innovation?
Many people are still confused about fintech regulations as well as how they fit into existing laws. The upcoming debate could provide answers for many questions yet unanswered by lawmakers in Washington, DC.
In the end, this hearing aims to promote a constructive environment for fintech companies of all types working hard on developing new products to benefit the industry while also safeguarding American interests.
It is still unclear what these regulations might look like or how they could impact current fintech trends in the United States and compliance departments across the world. The committee has not yet announced a date for when these discussions will take place, but they are expected to be in the coming weeks.
What do you think of this topic? Share your thoughts with us on social media.