Systemic Risk and the U.S. Payment System
Although there are many things about the Chinese financial system not to like, its regulatory approach to fintech and BigTech shows that U.S. financial regulation is even more antediluvian than you think.  Earlier this week, the Chinese government announced that like-kind lending and payment services will come under like-kind capital regulation.  At about the same time, Square opened its new bank and, while the insured depository comes under regulatory-capital standards, the parent’s ability to back it along with its own capacity to handle its far-flung payment operations is to be wondered at.  Any firm which derives at least half its income from bitcoin trading may reasonably be said to have volatile earnings with significant vulnerability that warrant buffers at the parent level, not just at the bank in its high-flying bosom.  In a recent issues brief, FedFin said what we think the U.S. is likely to do this year about tech-finance regulation.  Here, I turn to what it should do.