WASHINGTON—The Bureau of Consumer Financial Protection has announced that it is working with the Commodity Futures Trading Commission to develop a regulatory “sandbox” for fintech firms.
“We are … in the process of putting together, for lack of a better word … a fintech sandbox,” said acting CFPB Director Mick Mulvaney in remarks to the Women in Housing and Finance group, Pymnts.com reported.
“We recognize that so often the case is with new technology, there is a needle you have to thread,” he added later. “If you don’t give any regulation at all, it has the chance to go off the rails and completely burn itself out, which is where I was fearing Bitcoin was going to a couple months ago if they haven’t already. And at the same time, if you overregulate, you sort of tamp down that creativity and you discourage the innovation.”
While the Dodd-Frank Act allows the CFPB to implement ways to foster innovation, the agency’s efforts have largely been seen as inadequate, noted Pymnts.com.
“A sandbox provides relief from certain regulatory requirements so fintech startups can test products and government authorities can offer guidance. The United Kingdom has already provided startups with this type of space, and earlier this year Britain’s Financial Conduct Authority (FCA) announced plans for a global testing bed for new financial technology apps.
Chris Woolard, the FCA’s executive director of strategy and competition, revealed at the time that the FCA’s sandbox, which is the first of its kind, has worked with 70 fintech firms – and 90% of those in the first round of applications made it to market and were able to easily raise money, Pymnts.com noted.