Brian Brooks defends fintech charter to House Financial Services Committee

Brian Brooks defends fintech charter to House Financial Services Committee

Brian Brooks has defended the enacted fintech banking charter while serving as the currency’s acting controller after Congressional Democrats targeted the license on Thursday.

Brian appeared as a witness before the Subcommittee on Consumer Protection and Financial Institutions of the House Financial Services Committee at an April 15 hearing entitled “Banking Innovation or Regulatory Evasion? Examining Trends in Financial Institutions Charters.”

The fintech charter was introduced by the Office of the Comptroller of the Currency, or OCC, and was supervised by Brooks in 2020, allowing financial technology companies, including cryptocurrency companies, to offer loan and payment products without being supervised from state banking regulators, FDIC insurance or customer deposits.

California representative and chairman of the House Financial Services Committee, Maxine Waters, claimed that banks and national regulators have complained about the lack of regulatory oversight of fintech companies licensed under the charter:

“Government regulators, community banks and credit unions have raised the alarm about how new entities, including major tech companies, receive unconventional bank charters and offer banking products and services, while circumventing the rules that most banks, including community banks, must comply with.”

Waters characterized the OCC as having “exceeded its authority” and accused the office of “pretending that laws signed by Abraham Lincoln were intended to create fintech or cryptocurrency charters.”

Brooks, however, told the committee that the charter had strengthened regulatory oversight of the fintech and crypto industries, arguing that their activities would otherwise continue out of the sight of regulators.

Brooks described the charter as empowering companies that “provide consumers with better alternatives to traditional banks on the one hand and small financiers, such as payday lenders, on the other.”

Other Democrats expressed concern that Bitcoin is primarily a vehicle for criminal syndicates, with California’s Brad Sherman claiming that the crypto asset is largely used by “tax evaders” and “narco-terrorists.” Texas-based Al Green also raised what he believed were his constituents’ concerns about the prevalence of Ponzi schemes in the crypto sector.

Brooks dismissed these concerns, arguing that foreclosure rules could hamper the technological dynamics of the United States and that heavy-handed legislation could undermine U.S. soft power in the emerging digital economy:

“We’re building a second internet here – it’s not built for terrorist financing, it’s built to allow us to have a truly decentralized internet. If you believe that America’s soft power in the world has a lot to do with our controlling ICANN and the Internet protocol, I think you would think the same about these new protocols. “