Steven Harras

The Federal Reserve’s announcement last month that it would compete with private industry to launch a 24-hour-a-day real-time payment service has fintech experts raising an alarm: How will it handle fraud, which they say is inevitable with any financial system.

The Fed’s real-time gross settlement service, to be known as “FedNow,” is not scheduled to be available for at least four more years. Yet some financial services attorneys are already pondering who should bear the loss if it processes unauthorized payments.

Cryptocurrency is bumping up against centuries-old legal doctrines on abandoned property, presenting new concerns about who actually holds these digital assets and how states are able to claim them.

States are seeking to apply escheatment laws — which date back to feudal England — to present-day cryptocurrencies such as bitcoin, ethereum, bitFlyer and zcash. That’s even as the technological issues remain unresolved.

Bitcoin is under a cloud, one that Congress and others are beginning to acknowledge: the vast amount of energy required to obtain and maintain the virtual currency.

A university study released last week found the emissions produced by the worldwide network of computers that “mine” bitcoin sits “between the levels produced by the nations of Jordan and Sri Lanka, which is comparable to the level of Kansas City.”

Regulators are divided on the potential impact of financial technology on the global financial system and the need for better coordination and oversight.

As leaders prepare to gather for the G-20 meeting in Japan in late June, their finance ministers and central bankers are getting conflicting advice from regulators on the risks and benefits of fintech.

Congress may be beginning to contemplate a country where cryptocurrency — not cash — is the coin of the realm.

The Congressional Research Service examined the decline in cash usage in the United States and the potential rise of alternative payment systems, including bitcoin or other digital assets, in the purchase of goods and services.

The battle over the benefits and risks of new financial technology is escalating, in the form of a dust-up between New York state and a Seattle-based virtual currency business that, to the surprise of fintech followers, took the fight public.

The disagreement between regulators at the New York Department of Financial Services and Bittrex Inc., a cryptocurrency exchange, highlights the growing tension between fintech innovators and regulators enforcing rules designed for older, traditional financial institutions.

The boom in internet lending is taking a toll on traditional commercial banks, especially smaller ones, suggesting that they’re going to have to find ways to adjust to the changes wrought by financial technology.

New academic research says more than a quarter of the “peer-to-peer” dollars loaned over the internet today would’ve traditionally been handled by small commercial banks before the advent of online lenders.

A bank industry group is lobbying Congress to block financial technology firms, such as online lender Social Finance Inc. and payment processor Square Inc., from obtaining an obscure form of a state bank charter that would let them operate nationally with little federal supervision.

The Independent Community Bankers of America last week distributed a policy paper around Washington calling for an immediate moratorium on providing federal deposit insurance to industrial loan companies, or ILCs, which are chartered by only a few states — most notably Utah.

State attorneys general, consumer advocates, community activists, and banking regulators are criticizing proposed legal protections for banks and technology firms that develop “innovative” financial products.

The protections would come from the Consumer Financial Protection Bureau, which in December unveiled what it calls a “regulatory sandbox” that will allow firms to develop untested fintech products and services without fear of reprisals from regulators. While the criticism rolls in, financial industry groups are rallying behind the plan, even asking the CFPB to expand the legal safe havens.

A senior Treasury Department official is challenging the idea that rapidly evolving financial technology will require a sweeping overhaul of rules governing payment services and the electronic transfer of funds between consumers, banks, merchants and others.

In a recent analysis, Matt Swinehart, a senior counsel at Treasury, said a massive “regulatory rethink” of payment services won’t be required because many rules and standards governing payments are what he called technology neutral. The analysis appeared on a blog about the intersection between financial technology and government policy. Swinehart and the Treasury Department declined an interview request about his statements.

The leader of the Consumer Financial Protection Bureau is asking Congress to give the agency explicit authority to examine financial services companies for compliance with a law that caps how much a creditor can charge military servicemembers for loans.

In letters sent Thursday to Vice President Mike Pence and House Speaker Nancy Pelosi, CFPB Director Kathy Kraninger submitted a legislative proposal to “clarify” the bureau’s authority to supervise compliance with a military lending law designed to protect servicemembers from certain lending practices that may be considered predatory.

Federal Housing Finance Agency Director Melvin L. Watt warned that Fannie Mae and Freddie Mac are in danger of losing the capital buffers that enable the two government-sponsored enterprises to absorb financial losses, a development that could put a chokehold on the mortgage market and lead to another taxpayer-funded bailout.

The GSEs will see their capital cushions reduced to zero on Jan. 1, 2018, Watt said in testimony before the House Financial Services Committee Tuesday.

A bipartisan group of senators that claims it has the support of President Donald Trump is backing legislation to revive the Glass-Steagall Act, a piece of 1930s legislation that prohibited commercial banks from engaging in investment banking activities. 

The law was repealed in 1999, and some blame that repeal for the financial crisis that erupted in 2008 and 2009.

One of the nation’s top banking regulators is pushing back against critics of the Obama administration’s response to the financial crisis and subsequent recession, warning efforts to roll back heightened capital, liquidity and leverage requirements for banks could jeopardize the economic progress made over the last six years.

“Now is not the time to change course,” Comptroller of the Currency Thomas J. Curry said last week in a speech at the Harvard Kennedy School of Government.

State financial regulators now have access to a quicker and more efficient system conducting criminal background checks on a wider field of bank executives.

The Conference of State Bank Supervisors announced Tuesday its subsidiary, the Nationwide Multistate Licensing System, may now be used to electronically process criminal background checks “for many more individuals” at financial institutions.