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US Rep. McHenry Proposes Bill to Promote Financial Innovation

US Rep. McHenry Proposes Bill to Promote Financial Innovation

by Starling Insights

Starling Insights Editorial Board

Mar 20, 2024


Late last month, US Congressman Patrick McHenry, Chairman of the House of Representatives Financial Services Committee, reintroduced the Financial Services Innovation Act, which aims to promote innovation in the financial sector.

The legislation, which was initially proposed in December 2022, would establish federal regulatory "sandboxes" through Financial Services Innovation Offices (FSIOs) within federal financial regulators. These sandboxes would allow entrepreneurs to test new financial products and services while maintaining consumer protections.

Companies could apply for enforceable compliance agreements with FSIOs, enabling them to operate under alternative compliance plans. "Technology has radically changed how consumers interact with the financial system, as well as how financial institutions interact with regulators," said McHenry. “This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market.”

The bill mandates the creation of a FSIO Liaison Committee to facilitate cooperation among FSIOs and consultation with state regulatory entities. Additionally, the Financial Stability Oversight Council (FSOC) would be required to report on the impact of enforceable compliance agreements, identify burdensome regulations, and recommend measures to reduce regulatory overlap.

"Innovators have long flocked to American markets because we strike the right balance between fostering innovation and consumer protection—this bill will help ensure the United States continues to lead the world in financial innovation," McHenry added.

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