What Happens To Fintech Under A President Biden?
First off—happy Monday! Seems like we had some email deliverability issues (we're in the midst of switching platforms) so we wanted to resend this week's issue
Welcome to a guest edition of FTT+! While this is the first of its kind, Ian and I are both keen to do more of these when appropriate. So, if you have an idea that you would like to write about, feel free to shoot us a DM on Twitter or message us in the FTT Slack!
We’re honored to have John Collins of FS Vector writing for us this week. John has spent time in-house at large fintech startups like Coinbase, as well as on The Hill learning the ins and outs of DC, regulation, and how our Nation’s Capitol is going to impact the future of the fintech industry.
Hi all, John Collins here. Trying to fill the impossibly big shoes of Julie. I’m Founding Partner at FS Vector, based in Washington, DC. We advise fintech companies on business strategy, compliance, regulatory and public policy. You can read more about us here.
Before I begin though, I’d be remiss if I didn’t mention that tragic passing of Supreme Court Justice Ruth Bader Ginsburg on Friday. She is an American legend and hero, and our thoughts go out to her family.
But, as we do in 2020, we continue on and persevere through the worst simulation ever. And nothing is increasing our ability to persevere more than the 2020 election, happening in less than 50 days (ugh).
And everyone is wondering: What would a President Biden mean for Fintech? (Everyone= nerds like us… at least right now.)
If anything is certain right now it’s that no one knows what the hell is going on. But, one thing is certain: Joe Biden is either going to be President, or he isn’t.
Jim Saksa from Roll Call did a great job of laying out some of what we might expect in a new Biden administration earlier this week, but here’s my take and that of the FS Vector team:
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The status quo of how we’ve regulated fintechs in the United States is not going to stick. The current regulatory moats are being viewed as too narrow to be effective anymore.
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There is a realization that technology - if executed correctly - should have an outsized role in how people access money and avail themselves of financial services.
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You can’t overemphasize the impact that the COVID-19 pandemic is having and will have on these issues (and, well, everything else.). The reason is that the Paycheck Protection Program (PPP) exposed the creaky, rusted pipes of payments. The current system is not set up to do hundreds of thousands of small transactions. You needed a hammer and all that was available was a sledgehammer.
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Making it even more urgent for Democrats is that the very smallest businesses who needed - and still need- help are inordinately owned and operated by underrepresented populations. The disparate impacts of the PPP are very much on the minds of the Biden camp as they approach fintech and payments.
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We might get a new payments charter. While the payments charter Brian Brooks (formerly of Coinbase and now Acting Comptroller of the Currency) proposed is unlikely to survive exactly in that form under a Biden Presidency, that doesn’t mean Democrats are going to throw the proverbial baby out with the bathwater. Read Brooks’ recent Wall Street Journal piece (coauthored with Charles Calomiris) and you’ll see a macro view that may be a good marker for Biden camp’s thinking.
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VP Biden is anticipating an economy operating well below potential and in desperate need of federal intervention. He’s stated that he wanted a package, “a hell of a lot bigger” than the initial CARES Act, and he’s concerned about economic scarring. Biden has faced criticism over the size of the stimulus package passed during the Obama administration, which many economists felt was too small, and is under pressure to not repeat that mistake. It’s reasonable to assume that payments modernization - in some form or fashion - will be dealt with in such a package. Maybe it’s supporting a faster ramp up of Real Time Payments, maybe it's a greater choice in how you receive money from the government (CashApp, Venmo, or other digital wallets), or maybe it will be a central bank digital currency (probably not, but more on that below).
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The Fed has been pretty clear that they’ve done as much as they can. It’s all fiscal now. And, to get a really big fiscal win for the Democrats, it means getting at least 50 Ds in the Senate and a VP Harris. With that in mind, you could probably guess there might be two plans. For lack of better labels, you can call them platinum and gold. Platinum for total Democratic control of Congress and the White House, akin to the first two years of Obama. Gold for whatever else comes.
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On cryptocurrency, it’s going to be low on the list of priorities if the economy continues to bleed at the start of a Biden term. There may not be a stark difference between Trump and Biden when it comes to serious investment, attention, or regulation in the space. That said, Democratic appointees with the same sort of aggressively welcoming approach as CFTC Commissioner Peirce, will be likely be tougher to find. The view from the federal government will likely continue to be pretty cautious when it comes to crypto, with a serious eye to the risks posed in the money laundering and terrorist finance area.
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Could we get a Central Bank Digital Currency? Will one launch under Biden? Probably not. But, I think you can expect greater transparency and further investment into work the Federal Reserve is already doing. Depending on where the EU and China go, that may also change the speed and urgency in the U.S., but even that seems unlikely barring unforeseen circumstances. Which, 2020 is all about unforeseen circumstances…..
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It’s reasonable to assume the “likely suspects” of left/center-left think tanks will play a prominent role in the Biden campaign. These include, Center for American Progress, New America Foundation, Brookings, Third Way, Center on Budget and Policy Priorities, Economic Policy Institute and the Washington Center for Equitable Growth, Better Markets, among others. Look to these groups for signals on what the Administration may be focused on - and who may be staffing its ranks.
Ok, that’s it. Hit me up on twitter @johncollins or email me jcollins@fsvector.com if you have any questions!