Money 20/20: Regulation and Blockchains
Money 20/20, the “world’s biggest, boldest, and best event covering payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology” began on October 23, 2016 in Las Vegas, NV. The three-day convention features panel and keynote speakers highlighting various aspects of financial services including alternative lending and credit, B2B payments and finance, blockchain technology, data and algorithm-based innovation, digital banking and personal finance, economic inclusion and financial health, entrepreneurship and investing, real-time cross-border payments, insurance tech, issuing innovations, legal and regulatory issues, marketing and customer experience, mobile wallets and payments, new market research, next gen retail and commerce, PSO, as well as security and fraud. Each of these large topics will be explored through panels, keynote speakers, demos, and exhibitions over the next few days.
RegTech: Addressing Regulatory Challenges with Automation & Advanced Data Analytics
“Regulatory compliance is one of the most time and resource consuming activities for financial institutions. An emerging group of companies are helping FIs (financial institutions) to more efficiently comply with regulatory requirements by harnessing new technologies such as cloud computing, machine learning and blockchain.” This panel was moderated by Amy Davine Kik of BuckleySandler and included regulatory experts, financial institutions, and solution providers.
The panel began with its member offering definitions of RegTech (Regulatory Technology) ultimately reaching the conclusion that while the term “RegTech” may be new, the concept has been around for many years. The discussion then moved towards best practices for incorporating a new regulation.
Grace Brasington of IBM described the current practices of a proposed regulation being reviewed, sent to a committee, effects/implications considered, and ending with a question and answer/commentary period. The very manual process she described is burdensome because it requires several hours to accomplish the task. Blockchain technology could change the status quo, increasing efficiency without taking away from the secure and thorough system. Pawneet Abramowski from The Bancorp reinforced that regardless of the size of the FinTech world, many of the same problems are being faced by large and small financial providers sectors.
The Implications of Regulating & Self-Regulation for Online & Marketplace Lenders
“As an alternative lending industry matures, online and marketplace ledgers have faced challenges that regulators have noticed. In response, new trade organizatons have formed with the mission of moving the industry forward in a manner that protects both borrowers and investors.” This panel was moderated by Karen Gordon Mills from the Harvard Business and Harvard Kennedy Schools.
This panel focused heavily on the types of agencies that are best positioned to regulate FinTech. With so many overlapping and competing agencies attempting to draft FinTech-related regulations, companies are left with more confusion in determining who to follow. Just in the U.S., virtual currency has been classified as a commodity, property, security, and currency. Without a comprehensive federal regulatory structure, companies will have a difficult time fulfilling the necessary regulations. Ultimately the goal of any regulatory regime should be to increase efficiency using technology, and this is what innovators are hoping regulators keep in mind when addressing virtual currency regulation.
Balancing Blockchain Public Policy: Thoughtful Regulation Without Stifling Innovation
This panel delved into “a technology that began as an alternative digital currency that has managed to capture the imaginations of thousands of innovators and investors around the globe. This session [explored] the public policy landscape for blockchain tech, including the key question of how regulators and operators can balance the fine line between protecting consumers and stifling innovation.” The panel was moderated by Perianne Boring from Chamber of Digital Commerce and comprised of regulators and developers.
Collectively the panelists agreed that comprehensive, thoughtful regulation of blockchain technology will not remove people or human intelligence from financial services, but make the system as a whole more efficient and innovative. The discussion then shifted to a distinction of European regulatory schemes and the American approach. Circle’s General Counsel & Chief Compliance Officer, John Beccia, compared the tedious process of having to obtain licenses in each American state including the burdensome New York BitLicense as opposed to the more simplified European approach of having the FCA (Financial Conduct Authority) from which to obtain the same license. He credits the varied approach to fundamentally different philosophies in regulation with American regulators having a tendency to focus on regulation by enforcement.
Achieving this balance, or at the very least keeping this balance at the heart of regulating and innovating alike, is the best conclusion that can be reached at this juncture given the technology is in its beginning phase. Keeping both regulators and innovators as part of the discussion will undoubtedly be the best way in which FinTech development can occur without stifling regulations.
Sunday ended with four keynote presentations highlighting the various industries involved in the financial services industry. The first presentation showcased a joint venture from Visa and Chain. Together, these companies are launching a new blockchain-based product in early 2017 that enables a new medium for money.
The next keynote speaker, Lantern Credit’s John Sculley, brought years of experience from large corporations such as Pepsi Co, Misfit, and Apple when he described the best way for FinTech to grow is to focus on a customer plan that is separate than a business plan and allow those with domain expertise to meet those with technology expertise. By looking at a bigger picture, he opined that FinTech will grow exponentially and become a dynamic new future for the financial services industry.
The next keynote was from a pair of Early Warning employees who demonstrated their new project, Zelle, which is a user-friendly mobile payment transfer system. Their keynote included a demo of Zelle and highlighted the risk management systems in place to protect individual’s assets. Their new product allows users the ability to send P2P funds directly from an individual’s bank account without ever sharing any private information.
The final keynote of the evening was from Richard Cordray of the Consumer Financial Protection Bureau. He emphasized his agency’s role in ensuring basis precautionary measures are met by all FinTech companies just as those of other industries have to. Each of these presentations highlighted the need for different industries to work together in order to ensure FinTech develops organically, but without parameters that protect consumers without stifling innovation.