FinTech Executives Call for Regulatory Clarity to Encourage Innovation
Witnesses before the House Financial Services Committee ("HFS") called for greater regulatory clarity on AI, blockchain and digital assets.
The hearing follows the introduction of a bill, sponsored by HFS Chair Patrick McHenry and Ranking Member Maxine Waters that would direct federal regulators to conduct public studies on the "realized and potential benefits and risks of AI" in financial services. (See related coverage.)
In opening remarks, HFS Chair Patrick McHenry asserted that "onerous regulatory requirements" have constrained public markets. He criticized the SEC's enforcement-driven approach and lack of clear regulations on digital assets and blockchain. On consumer finance, Mr. McHenry said financial institutions are leveraging technology to innovate, but that "overzealous regulators" are stifling progress.
Among others, the following witnesses testified:
- Avlok Kohli, CEO of AngelList, urged adoption of (i) "sensible AI regulations that encourage responsible innovation without creating unnecessary bottlenecks;" (ii) clear regulatory frameworks for blockchain technologies that could streamline operations, reduce costs and improve the deployment of capital; and (iii) regulation that encourages reinvestment and enhances ways to unlock liquidity and lower transaction costs.
- Nathan McCauley, CEO & Co-Founder of Anchorage Digital, argued that crypto and blockchain will revolutionize finance and enable faster and cost-effective settlements compared to traditional systems. He argued the failure to implement crypto regulatory frameworks has "ceded [US] leadership to other countries" that have provided greater regulatory clarity.
- Alan Butler, Executive Director of EPIC, urged regulators, policymakers and businesses to (i) establish a clear set of rules to ensure that providers of financial services do not "cut corners outside the view of consumers to increase their margins;" (ii) prioritize strengthening data security; (iii) implement a strong data minimization framework that enables data collection, limits unnecessary data collection and prohibits secondary uses that do not serve the interests of consumers; and (iv) "continue to shut down unfair business practices that take advantage of the power and information imbalances inherent in the financial ecosystem."