When it comes to innovation, the US lags behind many countries. America is slow to advance in financial services, artificial intelligence, crypto, blockchain, open banking and other technologies that are changing the way the world does business.
Much can be explained by political gridlock, the use of our regulatory bodies as political tools, the torturous pace of regulatory operations, special interest groups, and the red-versus-blue ping pong game.
Ian Bremer, president of the Eurasia Group, shared this view with me: “Europe’s technocratic bureaucracy—something we lament—gives them an advantage in regulatory performance. They consult widely and effectively with industry and academic experts, while the heavy hand of lobbyists in the United States slows down the system.
In my practice, I work with all types of clients as they develop and deploy new financial products and services. It is not always easy to determine how they fit with the appearance of the controller.
Sure, these business leaders are focused on maximizing profits, but they also truly believe in democratizing finance and making credit accessible to all Americans, and they want America to lead innovation in financial technology.
Clients constantly come to me and say we follow the rules. We just need to know what the rules are. But for emerging markets and technologies, we are woefully behind. Absent clear rules and regulations, innovators and the organizations that drive them are left to cross their fingers that the country’s regulation-by-enforcement roulette won’t fall on them.
Without clear guidelines, many new technology entrants into the market will be cut off from basic business needs, such as proper business banking relationships and corporate insurance — the tools businesses use to keep them and their customers safe.
Let’s take a quick look at a few areas we’ve fallen behind on.
This utility provides third-party financial service providers with open access to customer banking, transaction and other financial information from bank and non-bank financial institutions through user-authorized application programming interfaces.
why? Allowing the linking of accounts and information across institutions to be used by consumers, financial institutions and third party service providers. Consistency is key.
We have been in this area for years. And in 2022, the Consumer Financial Protection Bureau announced it would exercise its authority under Section 1033 of the Dodd-Frank Act.
CFPB Director Rohit Chopra said, “While not exactly an open banking or open finance regulation, the regulation gets us closer to it by requiring financial institutions to share consumer information upon consumer request, allowing people to identify bad banks.” service, and creating more market competition.
That rulemaking process will take time. Market participants are submitting comments, and the process has begun late. This is one of the many areas in which our regulatory environment slows down to meet the needs of consumers and businesses. In comparison, the UK launched Open Banking in 2017. How are we five years late to the party?
It’s all praise. We love its options. But our nation does not have a basic AI policy. In October 2022, the White House outlined a blueprint for what AI regulation should look like.
But the European Union began that work four years ago, and according to the World Economic Forum, it has been leading the design, development and deployment of the technology to protect consumers. It would be great to have some guidance from Washington. But the devil is in the details – and we don’t have details yet. Let’s continue the AI bus.
Crypto and Blockchain
While the ongoing debate between the two terms remains frustrating, we’ll stick with Coins and Exchanges for now. The digital assets industry has been begging for guidance for some time. How long have we been warned and expect real crypto regulation?
Other than the US Supreme Court’s classic application of the Howey test to determine whether a coin qualifies as a security, there is little to guide corporations or protect consumers.
Controllers point fingers at each other. There is confusion about who has what authority. That is a problem for Congress to solve. And we all know how effective that branch of government has been lately.
Jason Heinrich, my colleague and colleague at Alloy Labs Alliance, did it well. “Historically, regulators have tried to avoid being prescriptive. The gap created inevitably results in bad things happening and then a regulatory response that is often bigger than the original problem. Building better and more inclusive financial products requires a partnership between innovators and regulators who create safeguards.”
We have an industry of innovators who want to build wealth, create jobs and make America a leader in financial technology. Our lawmakers and regulators need to help us do that. Seriously, we beg you.
This article does not necessarily reflect the views of Bloomberg Industry Group, publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Dara Tarkovsky He is an attorney, author, speaker, podcast host, managing partner of Aktut Law and external general counsel for FinTEx.
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