CFPB announces initiatives to support innovation

Acting Director of the Consumer Financial Protection Bureau Mick Mulvaney announced this week two new initiatives designed to support innovation in the financial services industry.

Acting Director of the Consumer Financial Protection Bureau Mick Mulvaney announced this week two new initiatives designed to support innovation in the financial services industry.

Mulvaney announced the creation of what he termed a “regulatory sandbox” for analyzing possible regulation of future fintech innovations.  The term “sandbox” refers to a mechanism for developing regulation that keeps up with the fast pace of innovation. Sandboxes are test centers for new innovation-driven business models that do not fit current regulation and aren’t supervised by regulatory institutions. The goal is to allow innovators to set their own pace in bringing improved products and services to consumers while still providing for the protection of those consumers.

Mulvaney also announced the creation of a new CFPB Office of Innovation subcommittee specifically tasked with creating policies to foster new technology and fintech innovation. The head of that new body oversaw fintech initiatives for the office of the attorney general of Arizona, which had a regulatory sandbox.

The CFPB’s Office of Innovation will reportedly examine cryptocurrencies and blockchain technology and cryptocurrencies. Cryptocurrencies are digital, decentralized currencies such as Bitcoin that promise to streamline financial transactions and protect values from the vicissitudes of national banking issues. Blockchains are open sourced transaction ledgers used by most cryptocurrencies to track transactions in an accurate and timely fashion. Proponents say they are unalterable and could provide transaction logs, balances and other financial data without the need of central servers. Peer-to-peer lending and private currencies will also be on the agenda of the Office of Innovation.

The news is timely, as it is now being reported that Raj Date, a former Consumer Financial Protection Bureau deputy director turned venture capitalist, is opening a consulting firm to help cryptocurrency and digital banking companies navigate Washington regulation. With players now in both the private and public sectors and many of the top altcoins trading well, fintech will draw more and more attention.

Mulvaney’s focus on innovation is no surprise. While he served in Congress, Mulvaney and a colleague created the bipartisan Congressional Blockchain Caucus in 2016. As the confirmation of his successor works through the Senate, these may be the last moves in Mulvaney’s short but eventful tenure at the head of the agency but could have long-term effects.