Rep. Patrick McHenry (R., N.C.) told that Republicans are preparing a legislative package called “Innovation Initiative” that would outline a regulatory framework he said would encourage growth in “fintech” and online investor pools like crowdfunding and angel investing, who typically raise seed money for startups, wsj.com reports.
“In Washington, we continue to force fintech companies into regulatory categories that do not fit and burden them with regulations that make no sense,” Mr. McHenry said, the source cites.
Fintech is less regulated than banks but increasingly watched by regulators who are trying to grasp how to oversee the rapidly growing sector. Some critics have said the federal regulatory uncertainty coupled with restrictions in some state laws have made it difficult for financial innovation to move forward.
Some consumer advocates have said that fintech firms are eroding traditional consumer protections and require more oversight. Many banks are also calling for more regulation of the sector, saying fintech companies have an unfair competitive advantage by selling similar services with less of a compliance burden.
“In the coming weeks and months, I will be introducing policy ideas that focus on ways to foster financial innovation and technology including angel investing, crowdfunding and financial technology,” Mr. McHenry said. “At the risk of sounding naive, I believe that these policy areas should be something that could garner bipartisan support, even in an election year.”, the source cites.
Though the draft is still under way, analysts predict the provisions for fintech companies would include easing restrictions for crowdfunding and a new national regulatory regime for marketplace lenders who have been asking for a federal framework as they have struggled to comply with varying state laws.
Some federal agencies have begun to make efforts to set up a regulatory framework for fintech companies. The Securities and Exchange Commission approved rules late last year to help give more clarity to startup businesses that raise capital through crowdfunding.
The Consumer Financial Protection Bureau finalised a policy in February 2016 that sets up a process for companies with an innovative product or service to apply for a statement from the CFPB giving them some assurance that their actions wouldn’t draw regulatory rebuke.
However, the CFPB also rattled the industry weeks later with an enforcement action against an online payment platform, Dwolla, based on the company’s allegedly exaggerated promises of data security. Dwolla paid a fine without admitting wrongdoing.
The legislative package is expected to come out in mid-April 2016.
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