In This Newsletter
Movement Toward Stablecoin Regulation
FinTech and Lifetime Financial Security
SALT iConnections New York
Movement Toward Stablecoin Regulation
At this year’s Global Conference, House Financial Services Committee Chairman, Patrick McHenry, shared his legislative strategy for digital assets in a fireside chat with Mike Piwowar. In the conversation, Capital, Crypto, and Climate: A Conversation with Patrick McHenry, the chairman discussed the two-pronged approach that the new House Subcommittee on Digital Assets, Financial Technology, and Inclusion will likely take as it crafts legislation for the digital assets industry. The committee plans to first draft a stablecoin bill that builds on last summer’s compromise draft with then-Chairwoman Maxine Waters. The second bill will be a joint House Agriculture and Finical Services market structure bill focusing on the broader digital assets industry that was introduced this June.
This May, the House Subcommittee on Digital Assets, Financial Technology, and Inclusion convened a hearing entitled ‘Stable’ in ‘Stablecoins:’ How Legislation Will Help Stablecoins Achieve Their Promise. The committee focused on three key themes: the role of state vs federal regulators in stablecoin, consumer protection, and maintaining a USD-denominated stablecoin ecosystem. Some key questions that remain are the roles of the Federal Reserve Bank vs state regulators in licensing, the explicit prohibition of comingling funds, and the inclusion of a mandate to research the use of central bank digital currency.
This committee hearing comes after the European Union (EU) adopted a comprehensive digital assets regularity regime, Markets in Crypto Assets (MiCA), that will come into effect next year. The EU framework will require licensing of digital assets firms, clarifies EU tax policy on digital assets, and establishes reporting and reserve requirements for stablecoin issuers. The regulation puts much of stablecoin regulation under the purview of the European Banking Authority and bans stablecoins from paying interest, coming down on the depository institution side of the debate about whether to treat stablecoins like banks or money market funds.
The digital assets industry has been calling for international norms and standards setting. By moving first, the EU is leveraging substantial agenda-setting power. The MiCA package will likely put pressure on global regulators in key jurisdictions like Japan, Singapore, UAE, Australia, and the US to adopt compatible standards on digital assets and stablecoin in particular.
FinTech and Lifetime Financial Security
In the Global Conference session, “FinTech and Other Innovative Solutions to Enhance Lifetime Financial Security,” Cheryl Evans, director of the Institute’s Lifetime Financial Security program, led a panel of innovators in the FinTech space in a discussion about tech innovations’ impact in saving methods over a lifetime. Panelists included co-founder of Treasury and co-founder of Betterment, Eli Broverman; founder and CEO of Graceful Finance, Anna Frankowska; professor of marketing and behavioral decision-making at the University of California, Los Angeles Anderson School of Management, Hal Hershfield; and president of Nationwide Retirement Solutions, Eric Stevenson. These experts discussed topics such as the financial institutions annuitizing defined contribution plans to have pension-like payments, the use of your house as an asset in retirement, and debt consolidation like student loans to contribute to retirement sooner.
Evans kicked off the conversation by contextualizing the need for innovative retirement solutions in the decades to come. She cited recent census data that shows today there are more Americans over 60 than under 10. These demographic changes will impact not only American savings, but also labor productivity and economic growth. She asked the panelists how they are driving innovation to meet the rapidly changing needs of an aging America.
Stevenson discussed how Nationwide created a retirement solution that annuitizes savings and guarantees a percentage over a lifetime. This allows people to financially plan for the costs of living a longer life, bringing back the core ideas of a pension while using the more commonly defined contribution plan. Broverman and Stevenson also highlighted one provision from the recent SECURE 2.0 Act passed in December 2022 about payments to student loans. Employers can match student loan payments to their employees’ retirement plans, so while people are tackling debt, they are also building these lifelong savings. Broverman predicted that this will lead to an uptick in contribution plans and a model for encouraging people to increase their participation in plans—even looking as far out as 10 to 15 years—as this will allow people to tackle their debt and continue saving over time. Frankowska’s work focuses on using housing as an asset to finance retirement while enabling people to age in place. Graceful Finance has two solutions that focus on receiving loans or annuities in exchange for partial equity in the beneficiary’s house.
Hershfield took a different approach than the other panelists. He works in the space between psychology and economics, focusing specifically on how to influence people to visualize their goals and solutions throughout different stages of life. His work examines the institutions and policymakers that have created choice architecture solutions to increase participation in saving plans, nudging people to increase their percentage saved or start their retirement savings. Hershfield warns of the downside of this architecture: there are only so many workers who have access to plans that can be auto-enrolled and auto-escalated. These underserved savers are an afterthought in the current retirement ecosystem. Hershfield spoke to the need for more retirement savings plans to offer these nudges or make these plans even more straightforward for those saving now. Hershfield discussed cognitive biases like the illusion of wealth and how often people prefer to receive lump sum savings over an annuitized stream of wealth when they could be getting more money from the annuity rather than the whole sum.
SALT iConnections New York
Nicole Valentine moderated the session, “FinTech Revolution: How Technology Will Reshape Banking and Investing,” at SALT iConnections New York 2023. The panel discussed the role the FinTech industry is playing in disrupting, mobilizing, democratizing, and revolutionizing the future of finance, banking, and investing.
The session featured a panel of industry veterans who offered insights into the current vulnerabilities in our financial system, the importance of trust and confidence in our financial markets, and tech-enabled solutions that the financial industry can leverage.
The session featured Dan Vene, co-founder and managing partner at iCapital, a company that offers digital solutions to participants in the alternatives markets; Gal Krubiner, co-founder and CEO of Pagaya, an artificial intelligence network enabling new lending opportunities for underwriters; Bob Diamond, founder and CEO at Atlas Merchant Capital LLC, a global investment firm; and Sanjay Gosalia, CEO of Nucleus Finance, a company reimaging how smart contracts can be integrated into financial services.