Regulating fintech: A harm focused approach

Abstract

Much of the discourse around fintech regulation focuses on how regulation can best facilitate private-sector innovation. However, financial regulators in the United States do not have a statutory mandate to promote private sector innovation. This Article argues that when devising approaches to regulating fintech, financial regulators should be guided by their statutory mandates – and that these mandates (even mandates for efficiency and competition) should be conceived of as instructions to prevent or mitigate public harm. This Article then uses the framework of “accommodating, taming, or coping” to assess some extant fintech regulatory strategies in light of how they respond to the public harm arising from some fintech business models (particularly crypto business models). This Article is critical of regulatory strategies designed to peel back existing protective regulation to accommodate private sector fintech innovation; instead, it advocates for a taming approach but recognizes that, in practice, protective regulatory responses can more accurately be described as coping. The Article concludes with an exhortation for more precautionary taming regulation of fintech technologies and business models.