Canada: The Path Forward: US Treasury Releases Fintech Report

On July 31, 2018, the US Department of the Treasury released its Report on Nonbank Financials, Fintech, and Innovation (the "Treasury Report"), containing approximately 80 recommendations on the regulation of financial services.  The Treasury Report seeks to identify policies that will further the US position in financial services and innovation, pursuant to Executive Order 137772 on Reducing Regulation and Controlling Regulatory Costs. 

The Treasury Report puts forward detailed recommendations applicable to financial services regulation, including in respect of activity-based financial services regulation.  The Treasury Report also addresses a number of data regulation related matters (such as access by third parties to consumer financial data, and data security and breach notification requirements) and issues relating to digital identity, artificial intelligence, cloud computing and the use of technology by regulators ("Regtech").

Data-Related Recommendations

Consumer Access to Financial Data

The Treasury Report recommends that financial services regulators recognize the benefit of consumer access to financial data and consider measures to facilitate such access.  The Treasury Report also recommends clarifying the treatment of data aggregators and Fintech application providers under current financial services legislation and working with the private sector to develop best practices on consumer disclosure for the use of financial data (including if necessary, principles-based disclosure rules), as well as addressing the issue of how best to ensure consumers are provided with an effective means to readily revoke prior authorizations.

The Treasury Report notes the risks associated with the current use of "screen scraping" to access financial data, and suggests that the current legal and regulatory regime could be impeding the implementation of more secure and efficient methods of data access (such as application programming interfaces ("APIs")).  Finally, the Treasury Report notes the importance, in facilitating access to financial data, of addressing the issue of data standardization (including, if necessary, through federal guidance) and of resolving questions regarding liability for unauthorized data access.

Data Security Laws and Breach Notification Requirements

The Treasury Report recommends that Congress pass a federal data security and breach notification law.  Currently, individual states have data security and breach notification laws imposing varying requirements, such as California's new Consumer Privacy Act. (see our blog post on the new California law here)  The Treasury Report recommends the enactment of a federal data protection law based on technology neutral and scalable standards, which would vary depending on an organization's size and the nature of its activities.  The ultimate aim would be to have a uniform national standard for data security and breach notification.

Digital Identity

The Treasury Report recommends that regulators work with the private sector to remove barriers to trustworthy digital legal identity products and services in financial services, and expresses support for efforts to implement a US government federated digital identity system.  

Artificial Intelligence

The Treasury Report recommends that financial regulators modernize requirements and guidance for technologies like artificial intelligence and machine learning in the financial services sector. In particular, the Treasury Report recommends that financial regulators cooperate with the Select Committee on Artificial Intelligence formed as a result of the 2018 White House Summit on Artificial Intelligence for American Industry.  Through cooperation, regulators could provide greater clarity for testing and responsible deployment of these technologies in financial services.

Cloud Computing

The Treasury Report recommends that federal financial regulation guidance (such as third party outsourcing guidance) be updated to facilitate the adoption of cloud computing, and suggests that "regulators should be wary of imposing data localization requirements" in connection with cloud computing.  The Treasury Report also recommends that a cloud and financial services working group be formed and tasked with supporting regulators in the modernization of their cloud computing guidance and engaging with industry stakeholders.

Regulatory Framework

Fintech Charter

The Treasury Report sets forth a number of recommendations aimed at updating the US regulatory framework to better enable innovation in financial services.  In particular, the Treasury Report recommends moving forward with the Office of the Comptroller of the Currency's proposed Special Purpose Fintech Bank Charter. (see our blog post on the concept of the Fintech Charter here).  The Treasury Report also recommends harmonizing state requirements and guidance in respect of licensing and supervision of lending and payments entities, bank partnerships with third parties, and the ability of banks to make innovation-related investments.  

Regulatory Sandboxes

The development of "regulatory sandboxes" to enable Fintech innovation in certain jurisdictions is also discussed in the Treasury Report.  The Treasury Report recommends that federal and state regulators cooperate to design a system that would function like a regulatory sandbox in order to facilitate innovation.  The Treasury Report suggests such a sandbox would need to be supported by efforts by US regulators to engage with industry and their international counterparts.

"Agile" Regulation/ Regtech

The Treasury Report also addresses how to best enable "agile" regulation to improve efficiency and foster innovation.  The Treasury Report recommends harmonizing regulation across states, possibly by using a passport system.  Federal banking regulators could also cooperate on the development of a framework to regulate partnerships between banks and Fintechs, and to develop standards for API agreements between financial companies and data aggregators.

The Treasury Report also notes the emergence of regulatory technology ("Regtech") (see our prior posts on Regtech here and here) and recommends that regulators explore partnerships with financial services firms and Regtechs to better understand technologies that could assist them achieving their mandate.  In particular, the Treasury Report recommends that legislation be enacted to authorize regulators to engage in developing and testing out proof-of-concept technology projects. 

Activity-Specific Regulation

The Treasury Report contains a number of recommendations relating to activity-specific regulation, in particular in respect of lending, payments and wealth management.


The Treasury Report contains recommendations in respect of marketplace lending, mortgage lending and servicing, student loans, and short-term installment lending (the New York state financial regulator has also recently issued a report on online lending, see our blog post here).   The Treasury report suggests Congress codify the "valid when made" doctrine which would allow valid loans under the federal legislation to be assigned to third parties without triggering  state interest rate limits.  Legislation to do so is currently before the Senate.  This could make it easier for marketplace lenders to assign or sell on their loans to state chartered entities.

The Treasury Report also recommends digitizing the mortgage process including the acceptance of digital promissory notes, e-signatures and automated property appraisals.  This could decrease costs and increase the value of data for the mortgage lending industry.  Data could also be valuable for student loans and short-term installment lending.  The Treasury Report recommends the Department of Education improve data quality for student loans in order to increase transparency in portfolio performance and promote risk sharing by institutions.  Such changes would make it easier to leverage advanced analytics in a lending context.


The Treasury Report calls on the Federal Reserve to set public goals and deadlines in conjunction with the work of the Faster Payments Task Force.  In addition, the Treasury Report recommends additional coordination between the Federal Reserve, Treasury, and other financial regulators in order to improve payment security, particularly for smaller financial institutions.

Wealth Management

The Treasury Report suggests harmonizing regulatory authority over wealth management.  This would mean various agencies would have to exercise deference to the primary regulator, which the Treasury Report suggests would likely be the Securities and Exchange Commission.

Takeaways for Canada

Canada is currently considering many of the same issues and concepts as addressed in the Treasury Report.  These include how best to modernize the financial services regulatory framework, the potential use of regulatory sandboxes, the tension between federal and provincial regulation and the desire for harmonization of regulation in certain areas, as well as the various data-related matters covered in the Treasury Report. For example, Canada has begun experimenting with a regulatory sandbox in the context of securities regulation.  In addition, Canada is in the process of amending the Personal Information Protection and Electronic Documents Act (PIPEDA) to include mandatory breach notification requirements.  Canada is also currently undergoing a consultation process on open banking involving a consideration of many similar issues to those addressed in the Treasury Report in respect of access by third parties to financial data (see our recent blog post on the topic for more information). 

The emphasis in the Treasury Report on international engagement is also noteworthy from a Canadian perspective.  For example, the drafters of the Treasury Report consulted with the Bank of Canada, Dutch National Bank, Monetary Authority of Singapore, European Commission, International Monetary Fund and UK Financial Conduct Authority.  The Treasury Report recommends increased participation by regulators in international forums and standard-setting bodies to share experiences, best practices, as well as international cooperation within the private sector. This proposed approach is also consistent with the UK Financial Conduct Authority proposal for a Global Fintech Regulatory Sandbox and the recent formation of the Global Financial Innovation Network (which includes, on the Canadian side, the Ontario Securities Commission and the Autorité des marchés financiers, and on the US side, the Consumer Financial Protection Bureau). 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions