While the US Federal Reserve’s recent announcement of a Novel Activities Supervision Program is a step in the right direction, the work is far from over, the leader of the American Fintech Council believes.
The Novel Activities Supervision Program is designed to enhance the oversight of novel activities conducted by banking organizations which are supervised by the Federal Reserve. The priorities are on crypto-assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with non-banks to deliver financial services to customers. According to the Fed, The program will be “risk-focused and complement existing supervisory processes, strengthening the oversight of novel activities conducted by supervised banking organizations.”
More on the program can be found here.
The development should be seen as the beginning and not the end of a process, American Fintech Council CEO Phil Goldfeder said this week. Goldfeder said the development is an acknowledgment that technology is playing a growing role in the financial services industry. The American Fintech Council supports the Fed’s efforts to maintain the safety and effectiveness of the country’s financial system as they also recognize the benefits these new technologies bring, including increased competition and efficiency, reduced latency, and the ability to reach consumers historically left behind by the traditional financial system.
“While the guidance is another important step towards transparency and the standardization of requirements expected by supervised institutions advancing innovation through technology, the Federal Reserve should continue to work with companies to establish thorough and detailed standards as to the Program’s function, eligibility requirements, associated guidance and rulemaking, and expected supervisory activities,” Goldfeder said. “It is critically important that this program be as transparent as possible and that clear standards are established and communicated before enforcing supervisory views on banking institutions.
“Without clear and established standards, regulators risk deterring innovation and inconsistently applying requirements across institutions leading to a lack of clarity and the potential for unfair outcomes. At this critical juncture for fintech companies and the banks that power them, pragmatic regulators combined with responsible innovators have a unique opportunity to truly shape the future of finance.”
Goldfeder added that the American Fintech Council has long supported regulatory modernization that focuses on innovation while also ensuring those regulators maintain responsibility and transparency.
“Modern and forward-looking regulation will strengthen the banks and fintech companies that innovate without compromising on consumer safety,” Goldfeder concluded. “We urge other federal regulators to follow suit and provide the regulatory clarity that can streamline the current patchwork of rules and regulations to ensure fair and consistent enforcement throughout our industry.”