CFPB’S New Offices of Innovation to be Led by Arizona Fintech Regulatory Sandbox Official: Cryptocurrencies and Blockchain Will Likely be on the Agenda
On July 18, 2018, Consumer Financial Protection Bureau (“CFPB”) Acting Director Mick Mulvaney announced that Paul Watkins, who previously led the FinTech initiatives in the Arizona Attorney General’s Office, will head the CFPB’s newly created Office of Innovation. According to a CFPB press release about the selection, the Office of Innovation will replace the CFPB’s Project Catalyst initiative (which the CFPB launched in 2012) and will “focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.” Project Catalyst and the Office of Innovation share the stated overarching objective of promoting “consumer-friendly innovation” in consumer financial services.
However, the selection of Mr. Watkins, who managed the first U.S. state FinTech regulatory sandbox program in Arizona, appears to reflect a renewed effort at the CFPB to reduce the federal regulatory compliance hurdles facing FinTech companies wishing to bring innovative products and services to the marketplace. Recent press accounts indicate that Acting Director Mulvaney expects the Office of Innovation to examine (among other things) the regulation of crypto/virtual currencies, other applications of blockchain technology, and microlending (i.e. small loans made by individuals instead of financial institutions).
Although many FinTechs will likely welcome the CFPB’s actions as much-needed steps toward more innovation-friendly regulatory treatment, it remains to be seen if the Office of Innovation will fully adopt the approach of the Arizona program and government-created regulatory sandboxes in other countries by allowing companies to temporarily test products without being subject to certain regulatory requirements.