The new D.C. Financial Services Regulatory and Innovation Council has been charged to create a regulatory framework sandbox to see that all District residents have equal access to financial services and are treated fairly by commercial institutions.
In January, D.C. Mayor Muriel Bowser (D) selected 19 members to the council, with D.C. Department of Insurance, Banking and Securities (DISB) Commissioner Stephen C. Taylor, as the chairman. Their inaugural meeting took place on Dec. 18 in Northeast at DISB headquarters.
The council has two mandates: One would be to study and report on the feasibility of implementing a financial services regulatory sandbox and the other to develop a blockchain and innovation regulatory framework to facilitate financial services.
“Actionable innovation is key for industry growth, particularly in the financial sector where it translates into more affordable products and services and new distribution channels that reach excluded groups,” Taylor said. “Regulatory sandboxes benefit consumers by providing proof of concept, making it possible to create services with better compliance and risk-management approaches.”
A financial services sandbox set up in the District would allow authorized businesses to test their innovative products, services and business models and delivery mechanisms in the marketplace with real consumers on a trial basis. A blockchain consists of digital information stored in a public database that records transactions like date, time and dollar amount of a retail purchase with a user name instead of an actual name and the transaction has a specialized code to it.
The purpose of the council will be to advise the mayor if a sandbox would be feasible for the District. If so, the council will provide a legislative, programmatic and policy recommendations to the mayor for implementation.
The launch of the council comes when bank branch locations are few in neighborhoods east of the Anacostia River despite an estimated 150,000 population while areas west have an abundance of banks and other financial services establishments. The recent shuttering of the PNC Bank branch in the Bellevue section of Ward 8 serves as an example of that type of financial services disparity.
Another example: Of the 18 Wells Fargo Bank branches in the District, only one sits east of the river and PNC Bank now only has its Anacostia branch.
Check-cashing service shops and retail outlets such as liquor stores that charge fees for financial service transactions are widespread on the District’s East End, serving many residents who are unbanked.
These schemes haven’t escaped the attention of council members. Council member Erica Miles, who works for the U.S. House of Representatives Committee on Financial Services as the diversity and inclusion director notes that social media and tech corporations are in the financial services industry.
“There is a great deal of discussion about Facebook in financial services,” she said. “We know that Apple has a credit card. This needs to be regulated in the District so people won’t be taken advantage of.”
Johnson said financial services regulation has become necessary “because there is a wild, Wild West out there” regarding who can offer these products and hardly any oversight from the District government.
“Who are the players in this industry?” she asked rhetorically. “Who is here in the District doing this? We need to know these things to protect people and particularly small businesses. I am a member of this council to be the voice of small business in this because people are being manipulated into making bad financial decisions based on lack of regulations.”
Taylor said a report with a recommendation on whether to set up a sandbox will be sent to the mayor in six months. After that, the council will provide support and feedback to the city’s executive branch and D.C. Council on it.
Taylor said the council seeks to help not only consumers and businesses east of the river, but anyone in the District.
“We are here to help everybody,” he said. “The more products that are available to people, the better it is for everyone and the products will be cheaper.”