Financial Regulators' Dilemma: Administrative and Regulatory Hurdles to Innovation

George Washington University Law School: Business & Finance Law Review
63 minute read | April.07.2020

Developments in financial technology hold great promise to enhance the quality, delivery, and reach of consumer financial services. However, many of the laws dictating the operations of financial regulators are more than 50 years old, and in drafting these laws Congress understandably did not anticipate the digital revolution. These aging laws and administrative practices are grounded in important objectives, but they also present meaningful obstacles to financial innovation that new technology could deliver.

The Omidyar Foundation asked Orrick to conduct interviews with key personnel at the principal financial regulatory agencies with the aim of identifying administrative laws and practices that present hurdles or barriers to financial innovation. We undertook this assignment, which we completed on a pro bono basis, with the cooperation and encouragement of agency personnel whom we interviewed. Our focus in this paper is not on the substantive laws designed to protect consumers and assure safe and sound operation of the financial markets, but on the administrative laws that potentially constrain regulators from promoting innovation and experimentation that stand to benefit consumers.

Originally published in Business & Finance Law Review; reprinted with permission.