U.S. Lawmakers Continued Focus on Financial Innovation
By Ali Wolpert, DTCC Managing Director, Government Relations
While no one can predict the results of the upcoming U.S. elections, one thing seems certain: the support for technological innovation in the financial markets is only going to continue gaining steam on Capitol Hill, regardless of the outcome on November 3.
The House and Senate have been examining a range of emerging financial technologies, specifically the use of distributed ledger technology (DLT) and growth of digital assets. The House Financial Services Committee’s Task Force on Financial Technology has held hearings regarding the broader digital asset space, and the House Blockchain Caucus continues to bring together industry executives and government officials to better understand the implications of blockchain technology. It’s not just lawmakers in the House that are exploring fintech initiatives. The Senate Banking Committee held a June hearing to examine the future of money, specifically regarding the benefits and challenges of digitization of money and payments.
Legislative proposals have been introduced on both sides of the aisle regarding a range of activity including, for example, proposals that seek to clarify definitions and regulatory oversight in this emerging space. Lawmakers are also considering legislation that would impact proposed projects from social media powerhouses. While it is too soon to say which proposals may gain further — and future — traction, the discussion alone has value as it underscores the ongoing Congressional focus on strengthening financial markets through responsible innovation.
The pandemic has further highlighted the potential benefits of innovation and the need to establish guiderails to support growth. During the past few months, we’ve seen Congressional interest in the concept of “digital dollars” gain attention as a proposed means for distribution of future government relief funds to eligible U.S. recipients, in addition to the creation and ongoing maintenance of “digital wallets” that could be hosted by the Federal Reserve. These proposed concepts can be viewed as part of the broader Central Bank Digital Currency (CBDC) conversation that’s gaining support in jurisdictions around the globe, and can take on greater significance as these discussions accelerate. The Federal Reserve system, for example, has been analyzing issues raised by CBDCs for some time and is currently conducting technical research to better understand potential opportunities and limitations.
As we near the end of the current Congress, legislative efforts undertaken over the past few years regarding the digital asset space aren’t for naught. This work can serve as a starting point to re-engage, reassess, and if needed, further refine activity and next steps when the new Congress is sworn in. Elected officials may change and priorities may shift; however, ensuring that the U.S continues to explore and responsibly implement emerging innovation will remain a priority. At the end of the day, technological innovation is expected to change the face of financial markets. By now, it’s not a matter of “if” this might happen — but “when” it’s going to happen.
