Hi All,

Another week of policy excitement. A major crypto settlement, updates on fintech-bank partnerships and interest rates, and the CFPB’s continued examination of all the ways consumers today are failed by financial services. Read on:

• More CBDC research, this time technical: The Boston Fed released a Phase 1 report from its “Project Hamilton” focused on the technical components of a CBDC. The partnership with MIT designed a transaction processor that could meet throughput demands, handling 1.7 million transactions per second. Following a Federal Reserve discussion paper on CBDC’s potential, this latest report shows positive findings on the usefulness of blockchains, and articulates some of the nuanced decisions that go into stablecoin architecture. Always good to see regulators investigating technologies via hands-on experimentation, but this shouldn’t be seen as any signal of real development towards a CBDC, especially after the Fed said it’d require Congressional action to do so.
• CFPB’s gut wrenching public comments on junk fees: If you need proof that financial services continue to fundamentally fail Americans, take a spin through public comments on the CFPB’s latest exploration into “junk fees.” Sticking to broad parameters of “when has your bank/provider ripped you off” served the CFPB well, with comments flying in (363 as of Sunday, 2/13/22) on all sorts of financial nightmares. From hidden credit card fees, to stacking overdraft charges, to simple interchange - it’s a litany of abuses that the CFPB will have a field day with. If you’re a fintech looking for pitch deck quotes, here’s your gold mine.
• Fed releases synthetic identity fraud mitigation toolkit: With fraud rising across the financial system, the regulator delivered a resource to help its supervised banks protect consumers. No new rules or guidance here, but with the growth of fraud-prevention tools in fintech, it’s a good place to start your learning.
• EU regulators call for increased protections around digital finance: In response to a 2021 call for research, a group of European regulators published a 109-page report outlining risks, opportunities, and seven recommendations for managing the growing digital finance sector. The report emphasized the need for stronger consumer protections, called for greater collaboration across member states, and focused on the intersection of data protection regulations with AML/CFT developments. Meanwhile, the EU Commission says regulatory harmonization is coming to the payments system, with legislation coming in the second half of 2022 covering a digital euro and instant payments.
• OCC wins valid-when-made ruling, interest rate exports can continue: A long-running issue in fintech regulation has been what happens to lending interest rate caps, which are set at the state level, when a loan is sold across state lines. The latest challenge to the OCC’s valid-when-made ruling, which states that interest rates can be exported, was rejected, meaning the rule stands. OCC Comptroller Michael Hsu “welcomed” the finding, though took the opportunity to call out against rent-a-bank partnerships designed to evade usury limits.
• Blockfi $100M settlement over yield accounts: States and the SEC brought charges against Blockfi’s offerings, claiming them to be unregistered securities and misrepresentations of savings accounts. This is the largest crypto settlement so far, with $50M going each to the SEC and states. Blockfi was also ordered to halt its account offerings to most Americans.

• SEC votes in favor of T+1: Gamestop and payment for order flow raised attention around the delays in securities settlement times, and the SEC is responding. In an open meeting, the SEC approved a proposal to explore reducing settlement times from T+2 to T+1. This could have a major impact on market-makers, as efficiency in securities markets is a huge opportunity to ensure retail investing continues to serve consumers.