Fintech Buoyant As Trump Era Gets Underway In US

With President Trump’s nominees for several high-profile roles in the US government coming from the payments and fintech sectors, professionals anticipate favourable conditions and less bureaucracy. 

The message from the White House is clear: it is seeking deregulation, systemic modernisation and fewer bureaucratic hurdles for US companies.

With a heavy presence in federal positions, the payments sector will also likely face fewer hurdles than in previous years. 

Technology's important part in the new regime was evident at the inauguration ceremony, with the leaders of the US’ largest companies featuring prominently. 

President Trump’s new "personnel as policy" approach stretches well beyond Elon Musk, one-time CEO of PayPal, and signals his commitment to innovation and deregulation.

Other high-profile appointees, such as David Sacks, Paul Atkins and Frank Bisignano, indicate an increasing willingness to bring the private sector into government. 

Of course, this approach brings risk: a low-regulation environment governed by those with greatest incentive for favourable policy could bring around less strict oversight, an end to consumer protection and changes that risk the stability of the entire financial system. 

Although Trump signed an executive order on Monday (January 20) halting regulatory action and federal hiring, big changes are set to come.

Crypto focus

Vixio asked a number of sources what to expect from the new administration. Unsurprisingly, cryptocurrency appears to be top of the agenda. 

Todd Baker, a fintech lecturer at Columbia University and senior fellow in law, said it is clear that there is some political debt to be paid to the sector, specifically the crypto space. 

“You have a number of people in senior positions who will feel obligated to deliver something to crypto folks — the interesting question is what these people want,” he said. 

“They are not unanimous in their views of how things should be handled. There'll be people put in place in the appropriate regulatory agencies who are going to mark a shift from being highly sceptical and sometimes oppositional with regard to crypto to much more accommodating.”

He suggested that the new leadership at the Securities and Exchange Commission (SEC) will draw the regulator away from the anti-crypto policies of the last four years, and that the prospect of reduced enforcement will be widely welcomed by service providers. 

As for fintech, he continued, when there is a shift of administrations there are typically changes in regulatory focus. Most of the enforcement actions that bank regulators have taken against the fintech partner banks — in areas such as anti-money laundering (AML), compliance or bipartisan issues — are already complete and will not be undone. 

“You'll see a likely opening towards chartering new banks that have a fintech focus, or allowing fintechs to acquire small banks. Things that just really didn't happen during the last four years will likely start happening again in the new administration,” Baker told Vixio. 

“Fintechs will have the opportunity, should they want to, to acquire or charter banks. That of course takes time, but it will happen.”

Personnel is policy

The entrenchment of fintech into the upper levels of government starts with Elon Musk, but goes well beyond just one individual.

The below table illustrates the depth of the potential for government infiltration in the sector. 

These are just the highlights — the breadth of fintech, particularly crypto, influence is a likely indicator of the future agenda. 

Individuals such as David Sacks and Paul Atkins have both had long careers in the space and will be supportive of innovation-forward regulatory policy, in sharp contrast to the more sceptical approach of Gary Gensler and others. 

Trump’s dominance in Congress, with Republican majorities in the Senate and House of Representatives, will also aid progress. 

“There will be a lot of progress with respect to crypto legislation,” said Tiffany Smith, a partner at WilmerHale and co-chair of the firm’s blockchain and cryptocurrency working group. 

She pointed to the Financial Innovation and Technology for the 21st Century Act, a crypto market structure bill that passed the House last year and was read twice in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. 

“It was the first crypto bill to make it out of one chamber of Congress, but it didn't make it all the way. The new Congress will be willing to start over,” she said. 

“French Hill, who is the new chair of the House Financial Services Committee, has said it is a priority and has also prioritised a stablecoin bill.”

She noted that South Carolina senator Tim Scott has announced his intention to start a digital assets subcommittee. 

“The momentum from last year in the House, along with this new subcommittee and the general more pro-crypto members of Congress in office, means there is a really good chance that we'll get crypto legislation passed,” added Smith. 

These policymakers are likely to usher in a new era for crypto. But, as Baker implied, this brings great risk. 

As the collapse of FTX showed, the asset class can be highly volatile and unpredictable, and reduced regulation will only serve to exacerbate that. 

However, Deb Baxley, a partner at PayGility Advisors, a payments industry consultancy firm, told Vixio the FTX collapse was down to how the exchange was managed and not because of crypto itself. 

“That could have happened with any kind of security,” she said. “But there could be a real crypto meltdown, not based on the management of the exchange, which would show that there's a need for some kind of regulation. But that's not going to happen in the near term.

“I’m not a fan of crypto, there are very few legitimate real purpose use cases other than just for gambling or illegal activities or for people who live in countries with poorly performing currencies like Argentina to get their money out of the country, which is only quasi-legal.” 

A welcome refresh

Setting aside the additional risk that an enlivened cryptocurrency sector will bring to the US financial system, the appointment of payments and fintech private sector professions to key positions could lead to a modernisation of a system in need of rejuvenation. 

The current patchwork of state and federal regulations and regulators responsible for the industry is convoluted and confusing, and some form of clarity will be greatly welcomed. 

The movement for this had already started under the previous administration, but had made little progress. 

Nellie Liang, who held the position of under secretary for domestic finance at the US Treasury under President Biden, called for a reboot of the rules and regulations governing the domestic payments system.

She cited the need for a federal framework to address potential risks and benefits of emergent new technologies in light of the rise in non-bank payment providers, digital payments and electronic money systems. 

Key individuals

The appointment of certain individuals to areas not traditionally associated with finance or payments is further evidence of a change of approach. 

For example, the nomination of Frank Bisignano, the CEO of Fiserv, to lead the Social Security Administration is likely to usher in an entirely new payments and fintech system at the agency controlling social insurance. 

The goal will likely be faster and cheaper payments solutions, akin to that of Fiserv itself. 

Similarly, Kelly Loeffler, CEO of crypto company Bakkt, will likely ring the changes as leader of the Small Business Administration. 

Jared Isaacman’s nomination has also raised eyebrows. As covered by Vixio, the Shift4 Payments CEO’s nomination to NASA has led to the SEC agreeing to settle charges related to reporting and proxy solicitation violations between 2021 and 2023.

Key areas 

The future of the Credit Card Competition Act and the Consumer Finance Protection Bureau (CFPB) remain uncertain, but there is no doubt these topics will surface imminently. 

Debates have been heated, but with the new leadership it will be easier to break deadlocks in favour of industry. 

Open banking is likely to progress under Trump. The final version of CFPB Rule 1033 on data sharing was welcomed by much of the industry, but some considered it a missed opportunity to advance safer open banking in the US. 

In late October, as covered by Vixio, the CFPB issued a final rule to implement the personal financial data rights established by Section 1033 of the Consumer Financial Protection Act of 2010. 

Moira Vahey, an advocacy and public affairs spokesperson for Plaid, told Vixio: “The issue we've been most interested in is the open banking regulation that came out last fall. We're pretty optimistic about it and hopeful that it will just remain in place, take effect next year and deliver benefits to consumers in the marketplace.”

A sea change in regulation

As regulatory heavyweights such as Gary Gensler and Marty Gruenberg leave their respective agencies, and figures such as Travis Hill step in to fill those gaps, radical changes to payments, fintech and crypto regulation in the US are likely. 

Other individuals, such as Federal Reserve vice chair Michael Barr and Director of the Cybersecurity and Infrastructure Security Agency Jen Easterly will soon see their time come to a close.

With their departure, we will likely see an end to a cautious approach to regulation and consumer protections.

This sea change will have broad economic implications, but could also present significant opportunities for fintech and innovation.