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The near-term future of banking: More regulation

Industry watchers have their eyes on consumers and crypto as prime areas for greater scrutiny and oversight.


President Joe Biden’s administration is putting its mark on the closely watched financial and regulatory landscapes.

“Priorities appear to be putting regulations in place,” said Daniel Gouldman, chief executive and co-founder of Unbanked.com, a global fintech solution built on blockchain. “If the regulations are smart and thoughtful, this can be a good thing. If the regulations are restrictive, they could really harm innovation and entrepreneurship in the United States.”

In its 2021 banking regulatory outlook, Deloitte noted that recent enforcement actions “send a clear message that existing laws and regulations will be enforced and that banking regulators, rather than easing up on their expectations, are demanding higher levels of accountability from boards of directors and senior management for the laws and regulations that are currently in place.”

Deloitte’s report lists several trends that could have a significant impact on the business and operating environment for securities firms this year and beyond. Among them, greater oversight of digital transformation and technological innovation, more emphasis on addressing climate risk and creation of a more dynamic data environment.

The goal is “ensuring continued confidence during a period of transitory inflation,” said Robin Lee Allen, managing partner at Esperance Private Equity, an emerging fund manager. “These proposed approaches—for both businesses and for consumers—will be based largely on the rule-making authority of various agencies, relying as lightly as possible on statute.”

Talk to industry watchers and they’ll tell you they’re paying attention to consumers and crypto.

A top priority is the Consumer Financial Protection Bureau, a regulatory agency created in the aftermath of the 2008–09 global financial crisis to oversee consumer-related financial products and services.

Carter Seuthe, vice president of content at Credit Summit, which helps consumers get themselves out of debt, said he expects the CPFB to get involved in the debt consolidation market. “This is a sector that has been growing rapidly in recent years, and that has only accelerated since COVID,” he said. “It’s hard to know exactly what kinds of regulations might be coming down on these financial services, but I would definitely expect them to go after what they perceive as bad actors in the space, and likely put limits on interest rates and monthly payments.”

Ann Martin, director of operations at CreditDonkey, a financially focused website, shares that regulatory expectation. “There has been some talk about expanding what constitutes abusive practices under UDAAP (unfair, deceptive or abusive acts and practices). An expansive definition could result in heavier penalties for banks found in violation.”

This is a big change from the priorities of former President Donald Trump, whose administration “was basically able to deregulate the industry in a number of ways without having to actively write laws with deregulatory language,” said Jake Hill, chief executive officer of DebtHammer, which provides debt counseling and consolidation. “Under Biden, I suspect we’ll see a return to form for the bureau, which means more protections for consumers.”

Look for regulators to scrutinize cryptocurrencies

Meanwhile, crypto is “front and center in the minds of regulators, whether it’s the Department of Treasury, the CFTC, the SEC and others,” said Gouldman.

Martin also expects more regulation of fintechs and crypto. “While fintech did well under the Obama administration, Biden’s support for it will likely come packaged with regulation,” she said. “One other thing we know for sure is that the administration is invested in encouraging lending and financial policies to limit the effects of climate change.”

Gouldman thinks regulations loom. “I don’t know what those will be. They’ll likely be focused around collecting taxes, catching bad guys who launder money, and preventing Wall Street types from manipulating crypto markets. If that’s where they start, that’s not bad at all,” he said.

Overall, however, he isn’t fearful. “Compared to the prior president, who just called Bitcoin a scam against the dollar … I’d rather see a lukewarm, muted approach to Bitcoin than an openly antagonistic one.”

According to Allen of Esperance: “We have a confusing time ahead of us, but I believe we will come out of the other side enlightened.”

Dawn Wotapka is a BAI contributing writer.

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