Over the past decade of rapid fintech development, startups and entrepreneurs in the market have called for practical and economical regulatory frameworks that could enable financial products and services to scale with the market’s growing clientele. Still, the government and regulators globally struggle to establish regulations for new generation financial services.
The core issue behind the government’s inability to establish reasonable regulatory policies and its obscure mentality towards financial technologies is the direct effect of divided and conflicting regulations to fintech startups.
Fintech service providers and financial network developers often focus on the development of cross-country and cross-network payment models, in which users can send or receive payments to or from abroad. There are also other major fintech businesses such as digital currency trading, transaction settlement, and financial management.
Ultimately, these financial operations heavily rely on user data and transfer of money. However, these operations are subjected to similar or identical financial regulations dealt by banks and major financial institutions, which essentially requires financial service providers to record and present any relevant user and financial data to government agencies when “necessary.”
More importantly, some federal states and regulatory bodies require fintech businesses to obtain licenses that are both inefficient and expensive to apply for, which makes fintech startups virtually impossible to run their normal operations.
“Contrary to the myth that this is the wild, wild West, most fintech companies who work with banks are heavily regulated and subject to the same regulations as banks,” said Scott Talbott, the top lobbyist at the Electronic Transactions Association. “Fintech companies who don’t partner with banks are still involved with financial services, so at some point there’s going to be a traditional player involved. But, that being said, fintech companies who aren’t partnering with banks are largely subject to a lot of similar regulations.”
The OCC and other government organizations in technologically advanced countries like Hong Kong and Singapore have expressed their strong interest towards fintech, voicing their plans to create practical regulatory frameworks and policies in the near future.
Specifically for bitcoin and digital currency startups, regulators must provide a revised set of regulations that could actually support the development of digital currency-based services.