Hello Fintech Friends,

Welcome to another week of fintech policy updates! This week, we'll explore the latest developments from the past week related to crypto regulation, artificial intelligence (AI), payments, and the Consumer Financial Protection Bureau (CFPB).

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1. Crypto Regulation

Last week, the House Financial Services Committee hosted an important testimony by Brian Nelson, the Undersecretary for Terrorism and Financial Intelligence at the Treasury Department. The focal point of Nelson's testimony was his assertion that the traditional financial system remains the primary conduit for illicit finance, contradicting recent claims by anti-crypto policymakers who overstated the role of cryptocurrency in organized crime.

At the state level, the Judiciary Committee of the Iowa House of Representatives has recently approved amendments to the Uniform Commercial Code. The proposed bill, titled “An Act Relating to Commercial Transactions, Including Control and Transmission of Electronic Records and Digital Assets,” aims to integrate digital assets and electronic records into commercial dealings. Notably, the bill acknowledges the legality of smart contracts, stipulating that they cannot be denied legal effect or enforceability solely because they are executed through distributed ledger technology or smart contracts. The bill will have to secure approval from both the State House and Senate before becoming law.

2. AI

The Federal Trade Commission (FTC) is taking decisive steps to combat impersonation fraud by proposing a new set of rules aimed at prohibiting the impersonation of individuals. Citing a surge in complaints related to impersonation fraud, the FTC emphasized its commitment to utilizing all available tools to detect, deter, and halt such fraudulent activities. In a news release on Thursday, February 15, the commission highlighted the increasing threat posed by emerging technologies, particularly AI-generated deepfakes.

3. Payments

Federal financial regulators are reportedly turning their attention to the payment app Cash App amid allegations raised by two whistleblowers regarding inadequate due diligence on customers. These allegations, spanning from 2016 to 2022, suggest potential loopholes that could be exploited for activities such as money laundering, terrorism financing, and other illicit endeavors. The whistleblowers describe an environment of a "shadow financial system beyond the reach of regulators," indicating a lack of internal controls that may have facilitated illicit activities.

On February 11, 2024, a new law signed by Governor Kathy Hochul of New York in December 2023 entered into effect. This law introduces consumer disclosure requirements for sellers who apply a credit card surcharge to sales transactions. Specifically, it mandates that sellers must prominently display the total price for using a credit card, including any surcharges. Furthermore, the law prohibits sellers from charging a final price that exceeds the posted price, ensuring transparency in pricing. Additionally, sellers are barred from imposing a surcharge greater than the amount charged by the credit card company for card usage. The law provides that non-compliant transactions could cost sellers a civil penalty of up to $500 per transaction.

4. CFPB

Last week, the CFPB shed more light on its goals of enhancing competition within the credit card industry and providing consumers with access to lower interest rates. The agency released data indicating that consumers holding credit cards from the 25 largest issuers faced elevated interest rates, irrespective of their creditworthiness. In its analysis, the CFPB observed that these major credit card issuers imposed interest rates that were 8 to 10 percentage points higher compared to those offered by small and medium-sized banks as well as credit unions. To foster competition and empower consumers, the CFPB is advocating for increased switching facilitated by open banking. Additionally, the bureau is actively addressing deceptive practices related to credit card rewards, scrutinizing the practices that allow credit card companies to levy junk fees, and encouraging consumers to engage in credit card comparisons to make informed financial decisions.

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See you next week!