As blockchain technologies have evolved to enable ever-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 become annoyed with waiting around for refunds. For many consumers and businesses experimenting with new digital assets, fast 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 of a world with digital wallets. But even for them, that future could remain out of reach because innovation in digital payments is slow. And that’s not because we don’t have the technology. According to many leading experts discussing fintech innovation at the Las Vegas conference Money 20/20 last month, the problem is that regulators have yet to set clear standards on what is and isn’t allowed.
In the United States, the lack of regulatory clarity threatens to slow down not just mainstream adoption of new technologies but also innovation in digital payment options, potentially cutting off consumers and businesses nationwide from sought-after conveniences, simply because regulators can’t keep up with how digital assets are being used today.
“There has to be some clarity that comes out, some standards, some ideas of the dos and the don’ts and some structure around it,” 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, that mainstream adoption will really be inhibited.”
According to Zabaneh, digital payment processors need government agencies to ensure much more stability before the companies can confidently “explore the potential” of using digital assets like stablecoins or central bank digital currencies to provide alternative payment options in e-commerce. She said that even though PayPal has a responsibility to continue innovating in digital payments, efforts can become stalled because “there needs to be more clarity around regulation,” particularly regulations around consumer protection and the tax implications of using digital assets. These are areas US agencies have only just begun considering, and that’s holding innovation back. “In order 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 repeated the same call in their sessions, warning that US fears over digital assets involved in financial crimes created hard-to-navigate compliance risks for those most invested in driving innovation. The executives said the US is moving so slowly in passing laws and establishing rules that industry leaders will start to conduct business elsewhere. Experts at Money 20/20 said this is already happening.
The US wants to be on the leading edge of digital currencies, but tension remains between what President Joe Biden wrote in an executive order this year concerning the country’s economic “interest in responsible financial innovation” and the wide-ranging security risks, including those to consumers and businesses, as well as to national security.
To keep fintech leaders doing business in the US and participating in what’s become a trillion-dollar market, Tufts University cybercrime expert Josephine Wolff told Ars she thinks the country must first prove it can prevent illegal activity and other security risks associated with digital assets.
But not everyone thinks that managing risks needs to come first. At Money 20/20, the vice chairman of the National Credit Union Administration, Kyle Hauptman, suggested that government agencies like his should not let concerns over risks involved with digital assets stop the country from approving financial partnerships ensuring that bold new fintech operations remain in the country and that the US captures the maximum financial benefit of dominating this spiking 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 his session.
For the US to avoid this misfortune, Hauptman told conference-goers that the US needs to focus not just on how to prevent illegal activity but also on how to support innovation by providing clear guidelines in advance so that industry leaders are clear on how to proceed with new initiatives involving digital assets. “To me, the most important thing is clarity,” Hauptman said.
