Fintech during Trump's second term: Five Washington insiders

Five Washington insiders on fintech during Trump's second term

November 20, 2024 3:07 PM

WASHINGTON — Current and former federal lawmakers hope fintech regulation in the second Trump administration will usher in an era of more innovation, and they are encouraging industry participants to bring ideas to the table.

The bank regulatory agencies are on the brink of major shifts in leadership and authority after keeping a tighter thumb on banks and their relationships with fintechs during the Biden era.

Though it's unclear what statutes and regulations will be amended, added or dropped, the handling of hot tech topics like artificial intelligence and third-party relationships is in for a reset, policymakers said Tuesday at the American Fintech Council's Policy Summit.

While President-elect Donald Trump hasn't said who he'll tap to lead the regulatory agencies, people in the Beltway and beyond expect a softer touch going forward. At the AFC event, fintechs, banks and other stakeholders expressed hope that agencies like the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corp. will welcome more experimentation.

The AFC event came one day before a House Financial Services Committee oversight hearing, where Republican lawmakers grilled Biden-era regulators, hoping to rein in rulemaking before Trump takes office in January.

Here's what current and former policymakers said Tuesday about the fate of financial legislation and enforcement during the second Trump administration:

Overturning Chevron deference is ‘a breath of fresh air’

Sen. Mike Rounds, R-S.D., said that the Supreme Court's decision earlier this year to overturn so-called Chevron deference — a decades-old legal doctrine that gave regulatory agencies more power to interpret statutes — is an opportunity for companies to be more innovative.

"So we've got a real opportunity here to turn the page with regard to how we treat regulation of businesses in the United States," Rounds said. "This is good, not just for businesses. This is really good for consumers as well."

Rounds also highlighted priorities for congressional Republicans once they have majority control of both the House and Senate, including in areas such as tax policy and government efficiency.

When asked about cryptocurrency legislation, Rounds said the ball is in the industry's court. He said the first step is deciding whether crypto is a commodity.

"We want innovation to occur, and this is one area in which we're going to need to innovate," Rounds said. "I'm open for different ideas within the industry itself, but you've got to decide which type of a product you want to regulate, and then where that regulation should go. … I think the industry itself is going to have to come back to us to talk to us a little bit about what your goal is."

FDIC’s future

Former FDIC Chair Jelena McWilliams said that she was surprised when she took the lead at the agency in 2018 by how "tedious the bureaucracy was."

During the next Trump presidency, she expects the FDIC to be more open-minded to the complaints of the fintech and crypto industries. She added that there needs to be mutual trust between fintechs and their regulators.

"Where I really hope we go with this reset is to a more reasonable relationship. We're not enemies, and we should not be perceived as enemies," McWilliams said. "You shouldn't perceive the regulators as the enemy, and the regulator shouldn't perceive you as the enemy."

McWilliams also described frustration with "political attacks" she encountered while leading the FDIC. She didn't disclose whether she would join a Trump administration again after resigning in 2022 amid partisan power struggles on the FDIC board.

She expressed optimism that FDIC Vice Chairman Travis Hill, the presumed heir apparent to lead the agency when Martin Gruenberg steps down in January, will foster an innovative environment. McWilliams worked closely with Hill at the FDIC and said she owes much of her success as chair in part to him.

Gruenberg announced shortly before McWilliams' speech on Tuesday that he would resign following calls for his ouster due to allegations of a toxic workplace environment at the FDIC.

The risk of state-level regulation

Rep. Brittany Pettersen, D-Colo., a member of the House Financial Services Committee, emphasized the importance of competent agency leadership to protect consumers and maintain a stable economy, adding that she hasn't been impressed by Trump's cabinet nominations. She expressed concern, especially in light of the Chevron decision, about having to rely on a "dysfunctional Congress" to spearhead regulation against financial threats.

Pettersen added that when the federal government isn't leading on regulation, states start taking "patchwork, piecemeal approaches."

"When we don't have federal guidance and standards, states start taking that on, which is incredibly difficult," Pettersen said. "I can tell you, as a state legislator for 10 years, we really don't fund the support at the state level that you need to take on some of these enormous issues."

Not only can state-level regulation run the risk of not appropriately protecting consumers, she said, it makes operating businesses across the country more complicated.

Restoring lost confidence in financial institutions

As technology moves forward, the Dodd-Frank Act needs to be reviewed and improved, said the law's co-author, former Sen. Chris Dodd, D-Conn.

The watershed 2010 law was an effort to change the architecture of financial services, Dodd said, following a massive loss of confidence in financial institutions from the financial crisis.

"I can't legislate confidence," Dodd said in a video that was shared at Tuesday's conference. "There's no way you can do that, but you can do things that will restore some confidence."

Dodd called the creation of the CFPB one of the law's biggest accomplishments. The bureau has faced several existential threats during its 13-year lifetime, and it's expected that the incoming Trump administration will hamstring its rulemaking and enforcement efforts.

Although the former senator, who has also served as an advisor to President Joe Biden, said that his namesake law is "a very strong bill" overall, there are parts that could be up for revision.

"As more technology emerges in financial services, we've got to provide the consumer protections so that people understand what this technology is and make sure we're not going back to the situations that existed more than 15 years ago and created this mess to begin with," Dodd said.

‘Regulatory neanderthals’

In a three-minute spiel, Rep. French Hill, R-Ark. said that the government and regulators need to "let technology flourish" so that companies can provide better services to consumers.

Hill, who could be the next top Republican on the House Financial Services Committee, said he wants to roll out policies that advance his "Make Community Banking Great Again" platform, and he invited industry participants to bring their ideas to lawmakers.

"In the House, we are the voice for that innovation and flourishing in the United States," Hill said. "We think it's the secret to economic growth. We want people experimenting and fintech experimenting, writing applications on blockchain to change the way we do finance in America. We think that's in the best interests of businesses and consumers."

Hill added that he thinks fintech could be leading technology innovation in the country, adding that he doesn't want to see "regulatory neanderthals hold that back."