U.S. Chamber of Commerce Event on FinTech

Welcome Remarks

David Hirschmann, CEO, Center for Capital Markets Competitiveness & Chamber Technology Engagement Center, U.S. Chamber of Commerce

In his opening remarks, Hirschmann discussed some of the opportunities financial technology (fintech) brings, such as faster payments, faster underwriting, and blockchain, but also noted fintech brings new challenges and questions about whether regulators can keep up with the fast pace of innovation. He explained that the current regulatory structure remains a challenge as it is out of date, noting that other countries are moving forward to update their regulatory frameworks.

Fireside Chat with Brent McIntosh, General Counsel, U.S. Treasury & David Hirschmann

Treasury Report

In response to a question from Hirschmann on what “stuck out” in the Treasury report, McIntosh explained that there were four broad themes: 1) the government should empower responsible fintech innovation, not impede it; 2) work to combat regulatory fragmentation, coordinating across federal regulators, the states and internationally; 3) when promulgating and reevaluating regulations, recognize that some of them stand in the way of the digital revolution; and 4) create a space for responsible innovation in regulations.

Regulatory Fragmentation and Coordination
Hirschmann asked what Treasury’s role is in addressing regulatory fragmentation and promoting coordination. McIntosh replied that Treasury is not the primary regulator in this space, but that Treasury Secretary Steven Mnuchin is chair of the Financial Stability Oversight Council (FSOC) and that they are working together and with Congress and the states on coordination. He continued that Treasury supports using the Office of the Comptroller of the Currency’s (OCC’s) fintech charter, as it does not make sense to operate under 50 different regulations across the states.

Bank Secrecy Act/Anti-Money Laundering (BSA/AML)

When asked for an update on BSA/AML reforms, McIntosh noted that Treasury is working to get regulators in the same room to talk about how BSA/AML is operating and receive feedback from regulated entities. He explained the value in having regulated entities, the Financial Crimes Enforcement Network (FinCEN), law enforcement and regulators discussing how to modernize the AML/Countering Financing of Terrorism (AML/CFT) system without losing its benefits. McIntosh stated that Treasury is working actively on modernizing the system and that there are changes “in the works.”

Artificial Intelligence (AI)

McIntosh noted that AI and big data has the potential to revolutionize fintech, such as through machine learning, improving ways to automate filings and more sophisticated analysis across data.


McIntosh explained that cryptocurrencies and distributed ledger technology were not in the Treasury report, as they have to be worked on in a separate track because they present “different” and “interesting” challenges. He continued that there is a working group under FSOC focused on cryptocurrency that discusses the different aspects of currency, securities, commodities, and where cryptocurrencies fit in the “constellation” of financial services. McIntosh noted that Treasury has an interest in “getting out of the way” of responsible innovation, but that they will not “sit by” and allow cryptocurrency to be a safe haven for criminal activity.

Data Privacy

McIntosh stressed the need for consumers to be aware of how their data is being used and to empower consumers to address it. He explained that Treasury believes there should be a single federal data breach regime, as the current regime has 50 different ways to deal with breaches.

Fireside Chat with Daniel Gorfine, Head of LabCFTC & Vincent Mollinari, Templum Investments

Focus of LabCFTC

Gorfine explained that LabCFTC has been focusing on the digitization of markets, to include cryptocurrency, the impact of algorithmic trading, smart contracts, AI, and other issues and their impact on the capital markets. He continued that LabCFTC facilitates market-enhancing innovation and informs policy to ensure regulators have the tools needed to keep up with fintech changes.

Swaps Regulation Version 2.0

Gorfine explained that in CFTC Chairman Chris Giancarlo’s Swaps Regulation Version 2.0, he laid out promising technologies and how they can be used in the markets, adding that the CFTC is also building out an internal think tank within the agency, collaborating with domestic and international regulators. He continued that there are a lot of new ideas in the regulatory technology space, such as tagging code to rules to help compliance. Gorfine noted that the CFTC needs to transform into a “quantitative” regulator that consumes and analyzes data to make better decisions, adding that this transition will be focused on ensuring the CFTC keeps pace with the markets.

Distributed Ledger Technology

When asked about his thoughts on distributed ledger technology, Gorfine replied that he thinks of it as a “spectrum of activities” but that the conflation of terminology can be problematic.

Smart Contracts

Gorfine explained that LabCFTC released their Smart Contracts primer in follow up to the 2017 primer on virtual currencies and the CFTC’s recent FinTech Forward conference. He noted that just because they are done in self-executed code does not mean that they are not subjected to regulatory requirements. Gorfine continued that Smart Contracts are a “vessel carrying an underlying product” with a digital signature, and that oracles are attached that are an information source to inform the Smart Contract.

Fireside Chat with SEC Commissioner Hester Peirce & Tom Quaadman, Executive Vice President, CCMC

“Helicopter” Regulation

Quaadman noted that Peirce has spoken about “helicopter” regulation in the past and asked what she means by the term, to which Peirce explained that regulators tend to hover over markets and micromanage, which can lead to harmful effects on innovation.

Regulatory Reform

Quaadman noted that the SEC still has a regulatory structure based on the markets in the 1930s and asked how the agency is dealing with new technologies and products. Peirce replied that while many of the rules are old, they have “held up fairly well.” She explained her belief that the SEC can allow for forward thinking with their existing rules, but that there is a need to find problems in existing laws and a willingness to change where necessary. For example, Peirce noted the need for additional guidance beyond the SEC’s Howey Test to determine what is a security, as well as the need to think about issues like custody of digital assets, as they are more challenging than other types of assets.

Quaadman then asked how the SEC deals with global competition as the UK and EU rapidly try to create their regulatory structure around cryptocurrencies and fintech. Peirce replied that she has advocated for the creation of an Office of Innovation at the SEC to shepherd new ideas, adding there is a need for work to be done across regulators to send a uniform message and provide investors with the guidance they need.

Regulatory Coordination

Peirce noted that there has been a good level of cooperation between the CFTC and SEC while working on a number of issues, including swaps reform, and that they will be working on digital assets and Bitcoin futures.

Discussion with Blockchain Caucus Co-Chairs Rep. Tom Emmer (R-Minn.) and Rep. Bill Foster (D-Ill.) & Julie Stitzel, Managing Director, C_TEC

Caucus Background

Foster and Emmer explained that there is bipartisan interest in the technology aspects of cryptography and the impact on blockchain, digital communication, and other related issues. Emmer noted the need for a “light touch approach” by the government so innovation can continue to grow, and explained that the Caucus can help educate Congressional colleagues on the issue and remove the fear of the unknown.

Distributed Ledger Technology

Emmer noted that there are benefits to distributed ledger technology, as it takes out the middleman and can streamline processes, adding that it “has great promise.” He continued that Congress needs to hear more from the public and industry, as there still is not a good definition of a currency, security and commodity.

Coordination Efforts

Stitzel noted the “tension” between the pace of innovation and creating rules and definitions, adding that states and global regulators have started a push on regulations, and asked how to find the right balance. Foster replied that it depends on whether the public will be tolerant of large, anonymous cash flows around the world and allow cryptocurrency to continue to flow anonymously, adding that there is already an issue with China using Bitcoin to move money offshore. Emmer stressed the need to be careful so that misinformation does not grow into overreaction, as Republicans and Democrats have been doing in recent committee hearings. He continued that it is “really important” that the states are encouraging innovation in this space.

Stitzel then asked if the U.S. is leading these efforts or following, to which Foster replied that the core technologies were developed in the U.S., but that he is unsure when it comes to implementation. Emmer replied that the U.S. has been a leader but that there is a risk of falling behind soon if regulators do not develop innovative approaches.

Other Caucus Priorities

Emmer noted that Rep. Maxine Waters (D-Calif.), incoming House Financial Services Committee Chair, is open to conversations on fintech and standing up a task force looking at issues in the committee, but that industry and entrepreneur engagement is needed so Congress knows where the pressure points are. He added that the SEC and CFTC have been building a “wealth of knowledge” through their engagement, and that more of that is needed with Members of Congress.

Fireside Chat with Paul Watkins, Head of Office Innovation, Bureau of Consumer Financial Protection & Kate Prochaska, Vice President and Regulatory Counsel, CCMC

Priorities and Issues for the BCFP

When asked by Prochaska about the priorities and issues for the BCFP, Watkins replied that they include the trial disclosure program, no action letter program, possibilities for sandbox and coordination with other agencies. He continued that bringing the BCFP into the next phase as an agency means having a functional no action letter program, adding that there is a “strong argument” that theirs could use revisions. Watkins added that it is a “very big deal” when a company approaches a regulator, as most companies do not want to.

Regulatory Coordination

Watkins noted the need for the U.S. to learn from other agencies and coordinate together, adding that regulators want to move forward and share best practices, as well as the need to smooth transitions between regulators and lower the cost to enter markets. He continued that it is “widely recognized” in the regulatory community that there is an international fintech race and that it is “not unique” to say there are issues among regulatory coordination efforts. Regarding state coordination, Watkins explained that regulators can work with the states and attorneys general, adding how important it is to “open the door” as it will be a component of many policies. He concluded that his long-term vision for the BCFP is to have a meaningful relationship with federal and state partners, expanding the level of coordination.

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