The financial regulation in the United States is slowly tilting towards blockchain and cryptocurrencies. In the latest development, the Consumer Financial Protection Bureau (CFPB) has announced it will be introducing regulatory sandboxes for fintech firms to aid them in the development of new products and services. This announcement will also include blockchain and cryptocurrencies startups, giving the much-required push.
CFPB’s move a much-required bridge between regulators and businesses
“Sandbox” is one of the most common words in the fintech universe. In the financial industry, the term refers to a mechanism for developing the regulation that keeps up with the fast pace of innovation. These regulatory sandboxes are also known as test centers for new innovation-driven business models that do not fall under the purview or are governed by current regulation or supervised by regulatory institutions. The purpose of the sandbox is to adopt compliance with strict financial regulations to provide the much-needed stimulus to the growth and pace of the most innovative companies, in a manner that doesn’t overpower the fintech sector with rules but also doesn’t moderate consumer protection.
This move by CFPB aims to provide a liberalize environment and also promote innovation in the fintech field. Nascent technologies like blockchain and cryptocurrencies are expected to benefit the most as they are in need of such support to flourish in their capabilities.
Although the concept is new in the US, regulatory sandboxes for fintech have helped a lot of countries in fostering innovation. The United Kingdom is one of the places where the institutional commitment to fintech is very strong, with London attempting to become the global capital of fintech. At the end of 2015, the Financial Conduct Authority (FCA) – the British market regulator – published a report as part of its Project Innovate, where it explained why a regulatory sandbox was needed. Following the same report and presentation from various stakeholders, the regulator in the UK began implementing it in 2016 with a final rollout in 2017.
It is believed that the same regulatory sandboxes have been used in Switzerland to foster cryptocurrency development projects in the nation’s crypto-valley.
An initiative sponsored by acting director Mick Mulvaney, this framework is set to promote competition and consumer access within the financial services industry. Mr. Mulvaney also believes these sandboxes will help in building a bridge of communication between regulators and businesses, allowing both sides to understand each other’s perspectives.
CFPB supports innovation which is a good sign for cryptos
Mulvaney believes that the CFPB has not been as innovation-friendly as it could have been in the past and he believes he will attempt to change that. Along with sandboxes, Mulvaney also announced that he is setting up the Bureau’s new Office of Innovation and has selected Paul Watkins to lead it. the Office of Innovation will try to focus on encouraging consumer-friendly innovation, which is now a key agenda for the Bureau.
The work that was previously done under Project Catalyst will now be continued in this new office. The Bureau proposes to accomplish its statutory vision to promote competition, innovation, and consumer access within financial services.
To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.
With this progressive regulatory news coming in from the US, all eyes would be on the Bitcoin ETF which is scheduled for approval on August 10. Are these signs that SEC might be considering crypto regulation?
Will the USA slowly tilt towards regulating cryptocurrencies? Do let us know your views on the same.