As the U.K.’s Financial Conduct Authority accepts 24 applicants to take part in its FinTech sandbox, a House bill in the U.S. has been introduced aiming to prevent financial businesses from moving to the U.K.
At the British Bankers’ Association conference, Christopher Woolard, director of strategy and competition at the FCA, gave a two-year progress report on the watchdog’s Project Innovate, which provides advice to businesses on what regulations they need to follow, reports Finextra.
Naturally, as London is considered a prominent location, the FCA is keen to provide the ideal setting for FinTech startups as it aids companies through the regulatory framework that can seem difficult to navigate.
According to Woolard, the FCA accepted 24 out of 69 applications and claims that interest in the sandbox has exceeded expectations with applicants from a number of sectors and countries including Canada, Denmark, Singapore, and the U.S.
Out of the 69, seven came from payment firms, including blockchain organizations.
I have said before that the FCA does not view blockchain as a panacea, but at the same time although still in its relative infancy, the development of Distributed Ledger Technology (DLT), and its application as blockchain, has the potential to offer genuinely innovative solutions to financial services.
In a bid to prevent financial companies from turning to the U.K. and its sandbox program, the U.S. has taken steps to bridge the gap by introducing a House bill, as reported in the Wall Street Journal.
Could this be the U.S.’s answer to catch up with the U.K.’s lead? It seems so, but will it work?
According to the WSJ, the FinTech industry is concerned that regulation in the U.S. is falling behind that of the U.K., prompting companies to consider moving their business to the U.K. where more aid is provided for new companies.
As the phrase goes: ‘if you can’t beat them, join them,’ which seems to be what the U.S. is doing by introducing a bill that would essentially copy the U.K. sandbox.
Introduced by Rep. Patrick McHenry (R., N.C.), the bill would require many federal agencies such as the Federal Reserve Board, the Treasury Department, and the Securities and Exchange Commission (SEC), to create an internal ‘Financial Services Innovation Office’, where companies would have the chance to seek help in product testing, according to the WSJ.
After Brexit, the U.S. may have thought that companies would turn to other European countries and the U.S. to build their businesses.
However, with the FCA considered the most forward-thinking and keen to maximize the potential of blockchain by applying it to businesses, it looks like the U.S. has been caught sleeping. As a result, it’s now playing catch-up.
It looks unlikely, though, that the bill will pass Congress this year. If it does get enacted, federal agencies would have 60 days to recognize at least three areas of existing regulation that could be applied to financial innovation. During this time, they could consider modifying or waiving regulation upon petition from a FinTech company.
Additionally, federal agencies would be required to create procedures aimed at reducing expenses and the time needed to test a product.
Speaking to the WSJ, McHenry said that regulators traditionally kill an idea before it has time to grow.
We want to have a mind-set shift in how regulators function and we want them to be responsive in order to enable financial innovation and…to drive it forward.
Under the bill’s proposal FinTech companies would need to prove that their idea serves a public interest, doesn’t pose a risk to the financial system, and improves financial products or services.
It remains to be seen, however, whether or not the bill passes Congress next year, but the proposed bill highlights the fact that the U.S. is keen to change the way it works and to remain a competitive location for FinTech startups.
For now, though, it’s playing catch-up with the U.K.
Featured image from iStock/Pixdeluxe.