The U.S. is unlikely to adopt the same kind of “regulatory sandboxes” that have gained traction in other countries as banks flirt with new financial and regulatory technologies, a Federal Reserve Bank of San Francisco attorney said Sept. 15.
Gerald Tsai, director of applications, enforcement and fintech at the Federal Reserve Bank of San Francisco, acknowledged that U.S. financial regulators are behind counterparts in the U.K., Singapore, Australia and China in terms of responding to fintech and regtech innovations.
U.S. regulators, Tsai added, have also been reluctant to embrace “greenlighting processes” and regulatory sandboxes, which permit financial institutions to experiment with new products and technology models without the full burden of federal regulation. But this approach to regulation is unlikely to change soon.
“I don’t see that sandboxes are likely going to be something that we in the United States are going to be using much in the near future,” Tsai told attorneys attending the American Bar Association’s Business Law Section annual meeting in Chicago.
Tsai acknowledged the Consumer Financial Protection Bureau’s decision Sept. 14 to issue a no-action letter to the online lending platform Upstart Network, making it the first company to receive a regulatory waiver supporting a fintech innovation. But he stressed the CFPB’s action doesn’t point to a U.S. regulatory pivot.
Tsai, who noted his comments did not necessarily reflect the views of the Federal Reserve Board, warned against any comparisons between U.S. regulators and counterparts in other jurisdictions.
“I think it is fair to point out that, maybe with the exception on China, these are much smaller economies, much smaller financial systems,” he said. “I don’t think it’s fair to compare the United States.”
In addition, Tsai said the lack of a system for regulatory safe harbors has not hampered financial innovation.
“Notwithstanding the complicated regulatory environment and the sort of delayed response that we seem to be having with a number of these matters, the U.S. fintech industry and the regtech industry is still quite large and has been a global leader for a long time,” he said.
Tsai added, “maybe our inaction at some level encourages innovation.”
To contact the reporter on this story: Michael J. Bologna in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
Notify me when updates are available (No standing order will be created).
Put me on standing order
Notify me when new releases are available (no standing order will be created)