On May 29, 2020, Joseph Otting stepped down as Comptroller of the Currency, and Brian Brooks was named Acting Comptroller. In his opening remarks, Acting Comptroller Brooks outlined his priorities, the first of which emphasized “responsible innovation to help the banking system keep up with changes in the way American consumers and businesses manage their finances.” As part of his “personal passion” for innovation, Acting Comptroller Brooks noted that banks will rely on the Office of the Comptroller of the Currency (the “OCC”) for both regulatory certainty and a flexible oversight framework that is able to reduce risk and allow regulated entities to adopt new technologies.
To facilitate innovation, Acting Comptroller Brooks said the OCC would continue to defend its authority to issue special purpose national bank charters to Fintechs, authority which has faced court challenges from state banking regulators since its inception in 2018 (read more here). Brooks also pledged support for banks exploring the use of new technology to increase financial inclusion, allowing more Americans to take control of their finances.
Acting Comptroller Brooks brings innovation experience to his new role at the OCC. Prior to joining the OCC as its Chief Operating Officer and First Deputy Comptroller on April 1, 2020, Brooks was Chief Legal Officer at the digital currency exchange Coinbase, Inc.
On June 4, 2020, still in its first week under Acting Comptroller Brooks and consistent with his focus on innovation, the OCC released an advance notice of proposed rulemaking (the “ANPR”) relating to digital activities. In the ANPR, the OCC asks stakeholders to comment on a number of existing regulations and their flexibility and applicability to cryptocurrencies and blockchain technology, as well as to propose changes that would help foster new innovative products and services to modernize the banking system. The specific questions are as follows:
- Whether the legal standards in 12 CFR 7, subpart E (National Bank Electronic Activities), and 12 CFR 155 (Electronic Operations of Federal Savings Associations) are sufficiently flexible and clear in light of the technological advances that have transformed the financial industry over the past two decades;
- Whether these legal standards create unnecessary hurdles or burdens to innovation by banks;
- Whether there are digital banking activities or issues that are not covered by these rules that the OCC should address (e.g., digital finders’ activities, certain software, and correspondent services);
- What activities related to cryptocurrencies or cryptoassets are financial services companies or bank customers engaged in and what are the barriers or obstacles to further adoption of crypto-related activities in the banking industry;
- How is distributed ledger technology used or potentially used in activities related to banking;
- How are artificial intelligence and machine learning techniques used or potentially used in activities related to banking;
- What new payments technologies and processes should the OCC be aware of and what are the potential implications of these technologies and processes for the banking industry;
- What new or innovative tools do financial services companies use to comply with regulations and supervisory expectations (i.e., “regtech”);
- What issues are unique to smaller institutions regarding the use and implementation of innovative products, services, or processes that the OCC should consider;
- What other changes to the development and delivery of banking products and services should the OCC be aware of and consider; and
- Whether there are issues the OCC should consider in light of changes in the banking system that have occurred in response to the COVID-19 pandemic.
This emphasis on modernizing existing regulations to embrace technology is a significant step for banks and Fintechs alike. All stakeholders should monitor these developments and take this opportunity to comment. The OCC will be accepting comments on the ANPR until August 3, 2020.