Ultimately, it looks like the hedge fund Robinhood users targeted, Melvin Capital Management, will just be partly bought<\/a> by a different, larger hedge fund, Citadel Capital Management. A separate company called Citadel Securities \u2014 which has the same owner as Citadel Capital Management, Ken Griffin, the richest man in Illinois<\/a> \u2014 facilitates some of Robinhood\u2019s transactions.<\/p>\n Robinhood itself makes money by selling data on users\u2019 trades to giant Wall Street firms<\/a>, who then stake their own positions based off what the little guy is up to. The Securities and Exchange Commission<\/a>\u00a0also charged Robinhood last month for offering bad trading prices to unsuspecting users, since those trades were routed through firms paying Robinhood. If true, Robinhood\u2019s users were effectively paying a premium on their trades, despite the app marketing itself as \u201ccommission free.\u201d This took place between 2015 and late 2018, when Robinhood was growing rapidly, according to the SEC.<\/p>\n You wouldn\u2019t know any of this from Robinhood\u2019s faux-populist marketing about \u201cdemocratizing finance<\/a>.\u201d But much like traditional Wall Street and Big Tech firms before it, fintech is building an echo chamber of industry voices and former regulators to ease oversight and permit its predatory practices. These range from, as The Intercept and Type Investigations have previously reported<\/a>, high-interest lending like Best Egg to legitimately novel efforts (at least, in our lifetimes) to privatize and surveil the basic operations of the monetary system.<\/p>\n Fintech is neither inherently good nor bad; rather, like any technology, its potential impact on society is closely tied to the policy decisions guiding its use \u2014 and the next four years could define how much the fintech industry is able to shape the financial system. Left to their own devices, fintech firms could swindle average people through ill-advised day-trading or high-interest loans, usher new systemic risks into the financial system, and develop traceable, privately owned currencies with the potential to replace cash.<\/p>\n Responding to fintech will be a key regulatory challenge for the Biden administration. But it enters this fight with one hand already tied behind their backs. American financial law vastly predates the digital era and is often ill-suited to describing online financial activity. And plenty of fintech firms design themselves to deliberately evade falling under any legal classifications and the regulations that follow them.<\/p>\n Michael S. Barr, dean of public policy at the Gerald R. Ford School of Public Policy, on Aug. 24, 2020.<\/p>\n \nPhoto: Gerald R. Ford School of Public Policy\/University of Michigan Photography<\/p><\/div>\n At least three<\/u> potential Biden nominees have connections to the financial technology industry. Early reporting<\/a> in January named Michael Barr as Biden\u2019s favorite to be the next comptroller of the currency, a crucial regulator of national banks. Progressive legislators and organizations (including the Revolving Door Project <\/a>at the Center for Economic and Policy Research, where the authors of this article work) pushed back, citing Barr\u2019s previous bank-friendly record in government and his close ties to <\/a>fintech. He currently<\/a> runs a fintech project at the University of Michigan, works separately with the Bill and Melinda Gates Foundation on fintech, and advises a fintech-focused venture capital fund<\/a>. Barr did not respond to a request for comment.<\/p>\n Barr is also an adviser<\/a> at the Alliance for Innovative Regulation, a fintech-funded<\/a> think tank, alongside Georgetown professor Chris Brummer<\/a>, who has been floated as a potential Commodity Futures Trading Commission chair. AIR\u2019s \u201cmanifesto<\/a>\u201d for digital-age regulation argues that we need to overhaul the system \u2014 in the opposite direction, with a digital alternative that leaves as little oversight as possible. AIR\u2019s regulatory manifesto calls<\/a> for using biometric data in lieu of traditional know your customer requirements, which are the parts of our anti-money laundering regime that require companies to verify that customers are who they say they are when making financial transactions. Brummer did not respond to a request for comment.<\/p>\n Elsewhere, AIR calls to throw out or overhaul<\/a> practically everything that keeps the regulatory system accountable to the public, such as Freedom of Information Act processes or public comment periods, in favor of surveillance technology.<\/p>\n The Office of the Comptroller of the Currency, or OCC, which is technically part of the Treasury Department but operates with a great deal of independence, would be positioned to grant this major invasion of individual privacy. The industry claims<\/a>\u00a0that biometric data will be far more secure (and cheaper to administer) than traditional anti-money laundering tactics. Lost in the glowing industry press releases is public input into whether people are comfortable having their faces, eyes, fingers, and voices recorded by giant financial companies \u2014 and whether the data is stored safely or sold to outside actors. There\u2019s also the question of whether biometric data, once assembled, might be linked to a financial firm\u2019s other activities, most especially lending decisions. Without proper regulations, companies would be able to factor your facial and voice data into its decision to lend to you.<\/p>\n Barr also previously advised the fintech firm Ripple, which currently faces a multibillion-dollar lawsuit from the SEC<\/a>. The SEC is charging that Ripple\u2019s cryptocurrency, XRP, the third-largest worldwide, is an unregistered security\u00a0that serves no purpose other than to funnel sales to Ripple. (Bitcoin, by comparison, isn\u2019t produced by a single company, so it cannot be treated as a security; there\u2019s no underlying asset\u00a0that gains value if Bitcoin prices go up.) Ripple\u2019s CEO was also interviewed<\/a> by Brummer last year as part of \u201cDC Fintech Week,\u201d an annual confab between industry, regulators, and political leaders that Brummer facilitates.<\/p>\n In response to the pushback against Barr, The American Prospect<\/a> reported that the White House is now considering California regulator Manuel Alvarez for the OCC job. Alvarez is even more directly linked to fintech. From 2014 to 2019, he was the chief legal officer at e-lender Affirm, which offers \u201cbuy now, pay later\u201d loans at checkout for retail transactions, as well as short-term loans aimed at consumers without credit cards. According to Consumer Reports<\/a>, Affirm loans can run as high as 30 percent APR.<\/p>\n Alvarez now leads California\u2019s Department of Financial Protection and Innovation, sometimes called “the mini Consumer Financial Protection Bureau.” But \u201cinnovation\u201d refers to an office specifically set up to communicate with and encourage fintech development in California. Alvarez described the department\u2019s goal to Yahoo Finance<\/a> last week as to \u201cproactively engage with fintech in a non-confrontational manner, but also in a programmatic way so that we can try and … really develop a more holistic picture of innovation in financial services, and then let that inform the rest of the department\u2019s work \u2014 let it inform the supervisory work with respect to even existing licensees like our banks and credit unions.\u201d<\/p>\n In an email to The Intercept, a spokesperson for Alvarez said that he does not support the idea of letting industry players dictate the terms of regulation. \u201cThe DFPI is proud to be leading the nation in developing a regulatory framework that balances consumer protection and responsible financial innovation through expanded enforcement capabilities, a market monitoring arm, increased consumer outreach, and early engagement with innovators,\u201d Alvarez\u2019s statement read.<\/p>\n Joe Biden\u2019s administration<\/u> will also have to set itself apart from the Treasury Department under Barack Obama, which actively encouraged private fintech development. Other parts of the federal government built active fintech incubators, like OCC\u2019s Responsible Innovation initiative and the CFPB\u2019s Project Catalyst. Obama\u2019s chief fintech policy adviser was Adrienne Harris<\/a>, who is now Barr\u2019s close associate at the University of Michigan and an AIR board member<\/a>. Harris also founded an online insurance company after leaving the Obama administration.<\/p>\n Obama\u2019s OCC comptroller, Thomas Curry (also on the AIR board<\/a>), introduced a policy initiative called the special purpose bank charter in late 2016. A charter would bring fintech firms under OCC supervision, but grant them the license to operate nationwide as special purpose national banks with their full suite of financial products and no deposit-taking requirements. Such proposals to charter fintechs would limit<\/a> states\u2019 regulatory powers and empower<\/a> fintech firms to partner up with national banks, potentially furthering consolidation<\/a> of financial services into a handful of too-big-to-fail institutions. Both of Donald Trump\u2019s appointments to the OCC attempted<\/a> to implement Curry\u2019s proposal despite opposition<\/a> from state banking regulators. Sens. Sherrod Brown and Jeff Merkley opposed<\/a> Curry\u2019s push and the state of New York sued<\/a> the OCC in 2020 after Acting Comptroller Brian Brooks reintroduced the fintech charter.<\/p>\n In California, Alvarez has already pushed for other ways for fintech companies to sidestep regulation. A version of the legislation creating the \u201cmini CFPB\u201d that he helped draft, but which was never enacted,<\/a> called for the state government to specifically encourage fintechs to register in California as industrial loan companies. This somewhat obscure charter would allow fintechs to take consumer deposits without being subject to federal banking regulation at all <\/a>\u2014\u00a0a workaround to the OCC\u2019s unwillingness to grant them bank charters. Of course, Alvarez could reverse this if appointed to lead the OCC. Alvarez told S&P Global that his support for the industrial bank charters stemmed from an interest in keeping fintech firms based in California. \u201cWe cannot compel interested groups to apply in California,\u201d Alvarez wrote<\/a>, \u201cbut we can certainly provide a glidepath.\u201d<\/p>\n Finally, shadow banking<\/u>, or lenders that don\u2019t take deposits and aren\u2019t subject to regulatory oversight, are responsible for over 50 percent<\/a> of the home and personal loan market in the United States. Fintech firms are a major part of this lending boom, representing over a quarter<\/a> of loan origination in 2015, while offering<\/a> significantly higher rates than traditional banks and other shadow banking firms. And the lending gets even more dangerous when cryptocurrencies, famously volatile, are the medium of exchange<\/a>. While still nascent, this development in fintech activity will soon merit firm and appropriate regulatory responses from the CFPB, the SEC, and other relevant actors.<\/p>\n These turf fights over individual aspects of fintech or cryptocurrency are all ultimately proxies for a greater conflict: the \u201cwar on cash\u201d and the right to a public, nontraceable currency, including on the internet, said Rohan Grey, a professor at Willamette\u00a0University College of Law who studies financial technology and the history of money, in an email. \u201cFintech,\u201d he wrote, is just the newest, brightest, shiniest manifestation of a long struggle over public commerce.<\/p>\n \u201cAll the debates over ‘fintech,’ once you get beyond the scams and the hype, are really a debate about the future of money,\u201d\u00a0said\u00a0Grey. \u201cThe recent rise of ‘fintech’ is just the latest saga in a centuries-old struggle between democratic accountability and unaccountable private power, with the latter hiding behind promises of technological innovation.\u201d<\/p>\n The post Robinhood Is a Perfect Example of Fintech’s Insidious Power<\/a> appeared first on The Intercept<\/a>.<\/p>\n\n This post was originally published on The Intercept<\/a>. <\/p>","protected":false},"excerpt":{"rendered":" Biden\u2019s team enters the regulatory fight with one hand already tied behind its back.<\/p>\n The post Robinhood Is a Perfect Example of Fintech\u2019s Insidious Power<\/a> appeared first on The Intercept<\/a>.<\/p>\n","protected":false},"author":1299,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/18659"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/1299"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=18659"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/18659\/revisions"}],"predecessor-version":[{"id":18660,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/18659\/revisions\/18660"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=18659"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=18659"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=18659"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"8\/24\/20](\"https:\/\/prod01-cdn07.cdn.firstlook.org\/wp-uploads\/sites\/1\/2021\/01\/Michael-S-Barr-1024x732.jpg\")
\nAt least three potential Biden nominees have connections to the financial technology industry.<\/blockquote>\n