Regulation in the Era of Fintech

Technological innovation is changing the financial sector. Cryptocurrency markets have surged to all-time highs, culminating in the historic initial public offering of Coinbase, the first major cryptocurrency company to go public on a U.S. stock exchange. Retail investors have used Reddit and various commission-free trading platforms to spark unprecedented market volatility in “meme stocks,” such as GameStop. And at the same time, the Internal Revenue Service has struggled to distribute stimulus checks to millions of Americans, highlighting the need for better technological and regulatory solutions to facilitate faster payments in the United States. New financial technology, or “fintech,” promises to make the financial system faster, better informed, and more global. Once a budding sector of finance, fintech is now a constant presence in every corner of the industry. Fintech products have opened the door to many new opportunities for consumers, investors, and businesses. But with these opportunities, come new challenges. Regulators and policymakers face key choices as they adapt to meet the needs of this constantly changing landscape while keeping investors and consumers safe. The Regulatory Review has invited policymakers, scholars, and practitioners from across the financial sector to discuss the pressing issues fintech poses for the industry and to offer their insights about how fintech will continue to impact financial institutions, markets, and regulators in the future. The contributors to this series include: Usman Ahmed, Head of Global Public Policy and Research at PayPal Inc.; Jo Ann Barefoot, CEO of Alliance for Innovative Regulation; Christian Catalini, Chief Economist of the Diem Association; Rick A. Fleming, the Investor Advocate at the U.S. Securities and Exchange Commission; Daniel Gorfine, a professor at Georgetown University School of Law; Kristin Johnson, a professor at Emory University School of Law; Ivy K. Lau, a member of the Global Public Policy and Research team at PayPal Inc.; Alexandra M. Ledbetter, Senior Corporation Finance Counsel in the U.S. Securities and Exchange Commission’s Office of the Investor Advocate; Jai Massari, a partner at Davis Polk and Wardwell LLP; Annette L. Nazareth, a Senior Counsel at Davis Polk & Wardwell LLP; Michael Nonaka, a partner at Covington & Burling LLP; Marlon Paz, a partner at Mayer Brown LLP; Jennifer J. Schulp, the Director of Financial Regulation Studies at Cato Institute’s Center for Monetary and Financial Alternatives; Kevin Werbach, a professor at The Wharton School of the University of Pennsylvania; and Yesha Yadav, a professor at Vanderbilt Law School. April 26, 2021 | Rick A. Fleming and Alexandra M. Ledbetter, U.S. Securities and Exchange Commission Investors in capital markets have access to more information than ever before, but it is challenging for even sophisticated market participants to sort through all of the data. The U.S. Securities and Exchange Commission should adopt data standardization practices for corporate reporting to make accessing reported information easier and less costly for the investing public. April 27, 2021 | Marlon Paz, Mayer Brown LLP Recent market volatility in GameStop and other “meme stocks” has put a national spotlight on the evolving role of technology in regulating U.S. capital markets. The U.S. Securities and Exchange Commission should improve the antiquated plumbing of the U.S. securities trading infrastructure to speed up the clearing and settling process. April 28, 2021 | Kevin Werbach, The Wharton School of the University of Pennsylvania Decentralized finance promises significant benefits, including democratized access to financial products, improved market efficiency, easier access to liquidity, enhanced financial privacy, and faster innovation. DeFi, however, also poses serious and multifaceted risks. April 29, 2021 | Usman Ahmed, Paypal Inc., Daniel Gorfine, Georgetown University School of Law, and Ivy K. Lau, Paypal Inc. Creating a digital currency in the United States would not, on its own, solve the challenge of disbursing government aid to individual citizens. The Internal Revenue Service would also require a digital infrastructure before it could implement a more efficient and secure method for transferring payments. May 3, 2021 | Jennifer J. Schulp, Cato Institute Growing numbers of individual investors are now trading on their phones through app-based commission-free trading platforms. But these platforms have come under fire recently for a new innovation: the “gamification” of trading. May 4, 2021 | Kristin N. Johnson, Emory University School of Law Research suggests that financial intermediaries abuse their role by extracting fees from unwary and sophisticated investors. Juxtaposing intermediary-driven transactions with those executed on blockchain protocols reveals the promise and peril of disintermediation. May 5, 2021 | Michael Nonaka, Covington & Burling LLP The Financial Crimes Enforcement Network is poised to be one of the most influential federal government agencies in charting the course for financial services innovation over the next several years. May 6, 2021 | Jo Ann Barefoot, Alliance for Innovative Regulation The existing financial regulatory system takes analog-era processes and information flows and speeds them up with computers. The new digital age requires that regulators rethink entirely how they operate. May 10, 2021 | Jai Massari, Davis Polk & Wardwell LLP, and Christian Catalini, Diem Association In seeking to eliminate the need for intermediaries in financial transactions, decentralized finance may hold great promise, but it also raises novel policy and regulatory considerations. May 11, 2021 | Yesha Yadav, Vanderbilt Law School Fintech products bring consumers into more direct contact with the financial system through digital technologies and new categories of financial service providers. Their emergence raises urgent questions about tradeoffs regulators must make between promoting innovation, market integrity, and simplicity. May 12, 2021 | Annette L. Nazareth, Davis Polk & Wardwell LLP The urgent demand for voluntary carbon markets animates the need for a new infrastructure to support these markets. A few innovators are positioning themselves to seize this new opportunity through distributed ledger technology