Top Story Technology Related

The FDIC has announced a "tech sprint" designed to explore new technologies and techniques that would help expand the capabilities of banks to meet the needs of unbanked individuals and households. The FDIC seeks tech sprint participants to help answer the question, “Which data, tools, and other resources could help community banks meet the needs of the unbanked population in a cost-effective manner, and how might the impact of this work be measured?”

In a few weeks, FDITECH (the FDIC's tech lab) will open registration for the tech sprint. Interested parties will have two weeks to submit applications requesting participation. After a brief review of submissions, FDITECH will invite a select number of teams to participate. Selected teams will attend a kick-off meeting and then work on their proposed solutions for a period of approximately three weeks. FDITECH will host a "Demo Day," inviting teams to make short presentations to a panel of experts who will evaluate their submission.

The Department of Homeland Security has published [86 FR 31987] a notice of public meeting and extension of the comment period to help inform a potential rulemaking that would amend DHS regulations to set the minimum technical requirements and security standards for mobile or digital driver's licenses/identification cards (collectively “mobile driver's licenses” or “mDLs”) to enable federal agencies to accept mDLs for official purposes under the REAL ID Act and regulation.

The virtual public meeting will be held on Tuesday, June 30, 2021, from 10:00 a.m. to 1:00 p.m. (EDT). Requests to attend the meeting and request for accommodations for a disability must be received by June 25, 2021.

The original Request for Information, "Minimum Standards for Driver's Licenses and Identification Cards Acceptable by Federal Agencies for Official Purposes; Mobile Driver's Licenses” (86 FR 20320), was published April 19, 2021. On April 27, 2021, DHS announced a 19-month extension of the REAL ID Act full enforcement date due to circumstances resulting from the COVID-19 pandemic. Beginning on May 3, 2023, federal agencies may only accept driver's licenses and state-issued identification documents for official purposes that are REAL ID-compliant and issued by a REAL ID compliant state.

Comments on the Request for Information are due by July 30, 2021.

The FBI announced yesterday it has issued a report that indicates people over 60 lost nearly $1 billion in online frauds and scams last year, The sudden need to shop online and the fear of COVID-19 made older Americans even more of a target for scammers and criminals than they had been in the past. For example, the report noted that the pandemic required many older people to shop online for the first time, and non-delivery of goods was one of the common fraud schemes that older victims experienced, The most common scams against seniors in 2020 were:

• Extortion
• Non-payment/non-delivery
• Tech support fraud
• Identity theft

The Financial Crimes Enforcement Network (FinCEN) has announced it will host a special virtual FinCEN Innovation Hours Program on September 9, 2021, focusing on the important role of privacy-preserving principles in developing technical solutions that enhance financial services innovation while countering illicit activity and national security risks that undermine the integrity and opportunity of the U.S. financial system. FinCEN encourages participation by companies developing solutions to privacy issues, such as homomorphic encryption, zero-knowledge proofs, and other technology that balances privacy and financial integrity. This could include fintech companies, regtech companies, venture capital firms, and financial institutions.

FinCEN requests that demonstrations highlight how the innovative solutions work and how financial institutions or business and retail consumers might use them, or how they may support private- and public-sector efforts to enhance our financial integrity, while protecting national security and personal privacy. Each meeting will last no longer than an hour.

Interested companies should submit a request online no later than July 23, 2021, and provide applicable background information about their firm’s business and innovative products. The number of individual demonstration sessions will depend on available time and the number of participants.

Federal Reserve Chair Jerome H. Powell has issued a video message of the Federal Reserve's response to technological advances driving rapid change in the global payments landscape. He noted, "As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system. In pursuit of these core functions we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking.”

He spoke of how tech advances enable the development and issuance of central bank digital currencies, or CBDCs. A CBDC is a new type of central bank liability issued in digital form. While various structures and technologies might be used, a CBDC could be designed for use by the general public.

As the Federal Reserve explores the potential benefits and risks of CBDCs, the key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S. domestic payments system in its ability to serve the needs of households and businesses. "We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks," Powell said. "The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials."

Powell announced that the Federal Reserve plans to publish this summer a discussion paper that will explore the implications of fast-evolving technology for digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency. The paper will complement Federal Reserve System research that is already underway.

• Federal Reserve press release

Acting Comptroller of the Currency Michael J. Hsu yesterday testified before the U.S. House Financial Services Committee on the condition of the federal banking system, the agency’s response to the COVID-19 pandemic, and its efforts to promote diversity and inclusion. Mr. Hsu’s oral and written testimony also included a description of his priorities as head of the Office of the Comptroller of the Currency.

On the topic of fintech bank charters, Hsu said that the OCC needs to determine how to charter fintech firms in a “safe and sound way, where we can adapt to the innovation. Some are concerned that providing charters to fintechs will convey the benefits of banking without its responsibilities.” He added, “Others are concerned that refusing to charter fintechs will encourage growth of another shadow banking system outside the reach of regulators. I share both of these concerns. We must find a way to consider how fintechs and payment platforms fit into the banking system, and we must do it in coordination with the FDIC, Federal Reserve, and the states.”

• OCC press release

The OCC has released a report on the key issues facing the federal banking system and the effects of the COVID-19 pandemic on the federal banking industry in its Semiannual Risk Perspective for Spring 2021. Highlights from the report include:

• Credit risk is elevated and transitioning as the economic downturn continues to affect some borrowers’ ability to service debts. Assistance programs and federal, state, and local stimulus programs have suppressed past-due levels.
• Strategic risks associated with banks’ management of Net Interest Margin compression and efforts to improve earnings is elevated. Banks attempting to improve earnings may implement measures including cost cutting, increasing credit risk (both credit and investments) or extending duration.
• Operational risk is elevated due to a complex operating environment and increasing cybersecurity threats.
• Compliance risk is elevated as banks’ expedited efforts to implement assistance programs continue to challenge established change management, product, and service risk management practices.

The report also highlights the low interest rate environment as a special topic in emerging risks.

Treasury Secretary Yellen met yesterday with members of the American Bankers Association Board of Directors to discuss ways the Treasury Department and the ABA can work together to facilitate a strong recovery over the short-term and a robust economic expansion over the longer-term. The Secretary highlighted the role of banks as a necessary source of strength due to their critical role channeling emergency government support to households and businesses through the Paycheck Protection Program and Economic Impact Payments.

Secretary Yellen also noted the crucial role banks can play as part of the Biden Administration’s historic investments in both infrastructure and the essential services for families—like childcare—to help drive broad-based growth. She also underscored the need for banks to embrace new technologies in coming years to expand financial services to underserved communities and the need for banks and regulators to collaborate to ensure robust and fair competition as technologies change financial intermediation.

The Federal Trade Commission has issued a new Consumer Protection Data Spotlight that reports consumers have lost more than $80 million to cryptocurrency investment scams, an increase of more than ten-fold year-over-year, according to a new data analysis from the Commission.

The Data Spotlight breaks down the contents of nearly 7,000 reports received from consumers about these scams in the last quarter of 2020 and the first quarter of 2021. The median amount consumers reported losing to the scams was $1,900. The spotlight notes that cryptocurrency investment scams take on a variety of forms, sometimes starting as offers of investment “tips” or “secrets” in online message boards that lead people to bogus investment websites. Another common form of the scam involves a promise that a celebrity associated with cryptocurrency will multiply any cryptocurrency you send to their wallet and send it back. In fact, consumers reported losing more than $2 million to Elon Musk impersonators alone since October.

The Data Spotlight points out that consumers age 20 to 49 were over five times more likely than older age groups to report losing money to a cryptocurrency investment scam, and that in the six-month period covered by the spotlight, consumers in their 20s and 30s lost more money to investment scams than any other form of fraud. More than half of their investment scam losses were in cryptocurrency.

The FTC has more information for consumers about cryptocurrency investment scams, and how to avoid them, at ftc.gov/cryptocurrency.

• Press release

The FDIC has issued a Request for Information and comments regarding insured depository institutions’ current and potential digital assets activities. In FIL-35-2021, the agency reported that—

• Banks are increasingly exploring several roles in the emerging digital asset ecosystem, and consumers are beginning to seek access to digital assets products and services, such as being custodians, reserve holders, issuers, and exchange or redemption agents; performing node functions; and holding digital asset issuers’ money deposits.
• The FDIC recognizes there are novel and unique considerations related to digital assets. This Request for Information is intended to help inform the FDIC’s understanding and any potential policymaking in this area.
• Part 362 of the FDIC’s Rules and Regulations may apply to certain digital asset activities or investments. FDIC-supervised institutions are encouraged to engage in discussions with FDIC supervisors, as appropriate, before engaging in such activities or investments.
• Comments will be accepted through July 16, 2021.

• Press release