As blockchain technologies have evolved to enable increasingly faster digital payments, the need for speed continues to drive both technological innovation and mainstream adoption of new digital assets. The sector is building a lot of momentum for obvious reasons – businesses have always wanted the ability to move money around faster, and individual consumers have grown annoyed with waiting for refunds. For many consumers and businesses experimenting with new digital assets, quick access to money has never felt more within reach.
This interest is not expected to cool, as younger generations become digital currency natives who only know the world of digital wallets. But even for them, that future may remain out of reach because innovation in digital payments is slow. And it’s not because we don’t have the technology. According to many leading experts who discussed fintech innovation at the Las Vegas Money 20/20 conference last month, the problem is that regulators have yet to set clear standards for what is and isn’t allowed.
In the US, the lack of regulatory clarity threatens to slow not only the mainstream adoption of new technologies, but also innovation in digital payment options, potentially cutting off consumers and businesses across the country from coveted conveniences, simply because regulators can’t keep up with how digital assets are used today.
“There needs to be some clarity coming out, some standards, some ideas about dos and don’ts and a structure around that,” said May Zabaneh, PayPal’s vice president of product in blockchain, crypto and digital currencies during a Money 20/20 session focused on how people use crypto to make digital payments. “Otherwise mainstream adoption will really be hampered.”
According to Zabaneh, digital payment processors need government agencies to ensure much more stability before companies can safely “explore the potential” of using digital assets such as stablecoins or central banks’ digital currencies to offer alternative payment options in e-commerce. She said that while PayPal has a responsibility to continue to innovate in digital payments, efforts may be stalled because “there needs to be more clarity around regulation,” particularly regulations around consumer protection and tax implications of using digital assets. These are areas that US agencies have only begun to consider, and it is holding back innovation. “For things to become mainstream, they have to be easily accessible, easily adoptable,” she said.
Zabaneh was not alone in calling for regulatory clarity to drive innovation. Executives from other payment processors like Checkout.com, cryptocurrency exchange platforms like Coinbase and banks like JPMorgan Chase all echoed the same call in their sessions, warning that U.S. fears of digital assets being implicated in financial crime created difficult-to-navigate compliance risks for those most invested in driving innovation. The executives said the U.S. is so slow to pass laws and establish regulations that industry leaders will start doing business elsewhere. Experts at Money 20/20 said this is already happening.
The United States wants to be at the forefront of digital currencies, but tension remains between what President Joe Biden wrote in an executive order this year about the country’s economic “interest in responsible financial innovation” and the wide-ranging security risks, including those as consumers and businesses, as well as national Safety.
To get fintech leaders to do business in the United States and participate in what has become a trillion-dollar market, Tufts University cybercrime expert Josephine Wolff told Ars that she believes the country must first prove it can prevent illegal activity and other security risks associated with to digital assets.
But not everyone believes that risk management must come first. On Money 20/20, the deputy chairman of the National Credit Union Administration, Kyle Hauptman, suggested that government agencies like his should not let concerns over risks associated with digital assets stop the country from approving financial partnerships to ensure that bold new fintech operations stay in the country and that the United States obtains the maximum economic advantage by dominating this spike market.
“The worst possible scenario is to get all the downside of a disruptive technology and not the upside,” Hauptman told Ars during an interview after the session.
For the U.S. to avoid this calamity, Hauptman told conference attendees that the U.S. must focus not only on how to prevent illegal activity, but also on how to support innovation by providing clear guidelines upfront so industry leaders are clear on how to go forward. with new initiatives involving digital assets. “For me, the most important thing is clarity,” Hauptman said.
