From bank to blockchain: US agency forms 'innovation' office to probe fintech revolution

A key US regulatory body, the Office of the Controller of the Currency (OCC), has announced plans to establish a department tasked solely with probing "responsible innovation" in the financial technology sector – expected to begin operations in the first quarter of next year.

The new office will implement a formal framework to improve the agency's ability to "identify, understand, and respond to financial innovation affecting the federal banking system." Headed by a chief innovation officer, it will have staff spanning Washington, New York, and San Francisco.

In a statement, the OCC said it plans to make the new department a "central point of contact" for requests and information relating to financial innovation – which no doubt will include the increasing popularity of virtual currencies and distributed ledger technology (DLT).

It will also be charged with establishing an "outreach and technical assistance program" for banks and financial institutions, conducting training programmes on innovation for OCC staff and encouraging "coordination and facilitation."

Comptroller of the Currency, Thomas Curry, said: "The OCC supports responsible innovation that enhances the safety and soundness of the federal banking system, treats customers fairly, and promotes financial inclusion [...] we are ensuring that institutions with federal charters have a regulatory framework that is receptive to responsible innovation."

The agency is planning to publish a white paper later this year on the main challenges of establishing a special purpose charter for non-bank fintech companies. The exact nature of such a charter is still under discussion, the OCC statement said.

The use of digital money – such as bitcoin – and the rise of firms implementing blockchain technology threatens to shake up the banking industry. Some monolithic regulators – like many central banks around the world – have struggled to keep pace with the technical leaps being made.

In a paper (PDF) released alongside the OCC notice, titled 'Recommendations and Decisions for Implementing a Responsible Innovation Framework', the agency detailed the main reasons for the creation of the new innovation office.

"Technological advances, together with evolving consumer preferences, are reshaping the financial services industry at an accelerated pace," it states. "Over the last several years, a large and growing number of nonbank financial technology companies have emerged to provide financial products and services through alternative platforms and delivery channels.

"Consumer preferences for financial products and services are also changing rapidly. Emerging innovations give consumers increased access and product options, control over choices, and the ability to tailor products to meet their individual needs."

It added: "These changes challenge traditional banking business models. Although banks have a long history of adapting to new technology and introducing innovative products and services, it is imperative for them to understand the impact of the evolving landscape."