July 2017
U.S. Regulators Enter the FinTech Sandbox

After trailing their foreign counterparts, U.S. regulators are focusing on how to regulate financial technology (“FinTech”) in a manner that will not stifle innovation. On May 17, the U.S. Commodity Futures Trading Commission (the “CFTC”) announced the creation of LabCFTC, an initiative designed to enhance the agency’s engagement with the FinTech industry. This announcement follows the announcement by the Office of the Comptroller of Currency’s (the “OCC”) earlier this year of a draft licensing manual for FinTech companies seeking to conduct banking activities.

Regulatory sandboxes should help the U.S. FinTech industry grow in a healthy way. They help FinTech companies by giving them a framework that should spare companies from regulatory enforcement actions that often result in financial penalties and legal costs. Sandboxes are good for individual investors by promoting an appropriate level of regulation of innovative financial products and services. Sandboxes are good for the U.S. economy because they allow new companies to grow, creating jobs and a thriving employment sector. Finally, sandboxes are good for regulators, as they help regulators understand new technologies, where any regulatory dangers may lie, and alternatively, where there are none, allowing for efficient, rather than cumbersome guidance.

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