The UK Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC) have signed a formal agreement that commits the two regulatory agencies to work together to support Fintech. This is the first such agreement for the CFTC and just one of many by the FCA that has established bilateral relationships around the world with financial regulators. This is also the first such agreement with a US financial regulator. The two sides indicated their innovation initiatives, LabCFTC and FCA Innovate would collaborate on supporting firms.
“International borders shouldn’t act as a barrier to innovation and competition in financial services and that is why agreements like the one we have signed today with the CFTC, a forward looking and proactive regulator, are so important,” stated Andrew Bailey, Chief Executive of the FCA. “As our first agreement of this kind with a US regulator, we look forward to working with LabCFTC in assisting firms, both here in the UK and in the US, who want to scale and expand internationally in our respective markets. As part of the Arrangement, the FCA and the CFTC will be hosting a joint event in London to demonstrate how firms can engage with both regulators.”
The FCA has been recognized globally as leading the world in encouraging both innovation and, crucially, competition. Regulators have studied the approach that has helped to create the most robust Fintech ecosystem anywhere.
CFTC Chairman J. Christopher Giancarlo said the FCA’s Project Innovate is the “gold standard” for thoughtful regulation and innovation;
“I am delighted to join Andrew Bailey in this arrangement to demonstrate our cross-Atlantic commitment to facilitating market-enhancing innovation and sharing best practices in FinTech engagement,” Giancarlo said. “This is the first Fintech innovation arrangement for the CFTC with a non-US counterpart. We believe that by collaborating with the best-in-class FCA Fintech team, the CFTC can contribute to the growing awareness of the critical role of regulators in 21st century digital markets. Our LabCFTC FinTech effort grew out of a bipartisan commitment to innovation, and I thank my fellow CFTC Commissioners Brian Quintenz and Russ Behnam for their continued leadership on these issues.”
Giancarlo recently testified before a Senate Banking Committee hearing on virtual currencies. His testimony was widely lauded by industry advocates for his approach towards the growing cryptocurrency market.
The agreement between the two agencies also highlighted the fact that another US regulator has been slow to engage in Fintech collaboration internationally. The Securities and Exchange Commission has yet to establish a public facing Fintech group nor create a regulatory Sandbox similar to what the UK trail-blazed.
The Cooperation Arrangement on Financial Technology Innovation is said to focus on information-sharing regarding Fintech market trends and developments. The agreement will also facilitate referrals of Fintech companies interested in entering the others’ market, and sharing information and insight derived from each authority’s relevant sandbox, proof of concept, or innovation competitions.
The FCA Innovate was launched in October 2014. The CFTC created the LabCFTC in May 2017 and hired well known Fintech advocate Daniel Gorfine to help craft its mission. These initiatives were set up to help businesses with innovative ideas navigate the regulatory landscape and engage with the regulator.
To date, the FCA’s Innovation Hub has supported over 500 businesses and the authorization of 43 businesses. LabCFTC reports it has engaged with over 150 entities since its launch last year, published its first primer on the topic of virtual currencies, and soon will seek public feedback on a planned 2018 innovation competition.