By Pete Schroeder

WASHINGTON (Reuters] – The United States will see a major shift in its financial policy next year as Democratic President Joe Biden and his new regulators prepare a slew if rule changes to cause headaches for Wall Street, corporate America and Wall Street.

Biden’s financial regulator team has begun to take shape a year after he took office. His picks will reverse Trump’s lack of regulation and take a firm stance against Wall Street, as well as new players in the financial sector, over the next twelve months.

The Biden Administration’s top priorities include creating a regulatory environment for financial technology and digital assets, increasing competition, and dealing with climate change.

Analysts and Washington insiders agree that the next year is crucial for financial companies looking to influence regulations.

Isaac Boltansky from brokerage BTIG, said that 2022 would be “the year in which the rhetoric is turned into reality” for certain key priorities for financial services policies.

While progressives hoped for a swift financial policy overhaul in 2021, the slow pace https://www.reuters.com/world/us/bidens-treasury-hobbled-by-cruzs-nomination-blocks-over-nord-stream-2-officials-2021-10-11 at which the White House has filled https://www.reuters.com/world/us/white-house-frustrated-by-slow-pace-senate-confirmations-nominees-2021-08-11 key roles at the Treasury Department, Federal Reserve, consumer watchdog and commodity markets regulator has delayed policy changes, said Aaron Klein, with the Brookings Institution.

With many of those roles now filled https://www.reuters.com/world/us/us-senate-votes-confirm-new-consumer-watchdog-chief-2021-09-30 or due to be filled https://www.reuters.com/markets/us/bidens-new-fed-regulation-chief-faces-dilemma-over-trump-rules-rewrite-2021-12-16 in coming months, the agencies can start to get down to business.

According to executives, cryptocurrencies is a hot area. The risks associated with digital assets have been explored by regulators. They are also being regulated according to federal laws.

They have warned https://www.reuters.com/legal/transactional/presidents-working-group-report-calls-stablecoin-regulation-2021-12-02 that stablecoins, digital currencies pegged to a traditional currency, could become systemically risky if they grow in popularity and should be regulated like banks.

Zach Dexter (chief executive at FTX US Derivatives), stated that “We will see federal financial regulators who have been very clear about this activity need to be regulated across all of them start moving forward on some specifics.”

In light of growing concerns that these unsupervised fintech companies could be harming customers, regulators are likely to restrain other players in the financial space.

The regulators have allies in the banking sector.

Rob Nichols is the chief executive of American Bankers Association. He stated, “You will continue to see lots of activity there. And we’ll also be very, very active at that debate.”

For example, Rohit Chopra, who became director of the Consumer Financial Protection Bureau in October, recently demanded https://www.reuters.com/markets/commodities/us-cfpb-asks-buy-now-pay-later-companies-data-products-practices-2021-12-16 data from big tech https://www.reuters.com/business/us-consumer-watchdog-lays-out-ambitious-agenda-eye-big-tech-lending-competition-2021-10-27 companies and buy-now-pay-later https://www.reuters.com/technology/buy-now-pay-later-surges-third-us-users-fall-behind-payments-2021-09-09 fintechs on their businesses, suggesting both sectors will receive more scrutiny next year, said industry executives.

Chopra will likely move forward next year with a regulation to create open banking, according to Scott Talbott (a senior vice president of Washington’s trade group, the Electronic Transactions Association).

That would require traditional financial institutions to give customers access to their own financial data, allowing them to switch more easily https://www.reuters.com/business/finance/what-is-open-banking-2021-07-09 between providers, boosting competition.

Regulators are also expected to crack down https://www.reuters.com/markets/deals/white-house-delay-fed-regulation-chief-bodes-badly-bank-ma-2021-12-02 on bank tie-ups after the Fed and Justice Department complete a review of merger policies next year. These developments are bad news for banks.

Raymond James, in his 2022 bank outlook wrote that “significant regulatory pressure has yet not been a decisive element for the market. However, investor concern rising for 2022 is a positive sign.”

CLIMATE CHANGE

For corporate America more broadly, the Securities and Exchange Commission’s draft rule https://www.reuters.com/article/usa-sec-gensler-climate/u-s-sec-chair-gensler-says-new-climate-risk-rules-will-require-companies-to-detail-measure-commitments-to-mitigating-climate-change-idINKBN2IM1UM?edition-redirect=in requiring public companies to disclose climate change-related risks could be a game-changer, exposing them to increased public and investor scrutiny.

Washington insiders say that corporations will likely resist the proposed proposal. It is anticipated during the first trimester.

In addition, banks are likely to face strict new climate change lending rules from the Office of the Comptroller of the Currency, which this month said https://www.reuters.com/article/usa-banks-occ-climate-idCAKBN2IV27Q it wanted banks to integrate climate risk into every aspect of their businesses.

Raymond James wrote that he expects a significant uptake in climate risk analysis activity and its integration into examination processes.

We all see the emerging of a single financial regulatory agenda in 2022 with significant implications for both banks and wider financial sectors.