Introduction Space weather refers to the dynamic conditions in Earth's outer space environment. This includes conditions on the Sun, in the solar wind, and in Earth's upper atmosphere. Space weather phenomena include solar flares or periodic intense bursts of radiation from the sun caused by the sudden release of magnetic energy, coronal mass ejections composed of clouds of solar plasma and electromagnetic radiation, ejected into space from the sun, high-speed solar wind streams emitted from low density regions of the sun, and solar energetic particles or highly-charged particles formed at the front of solar flares and coronal mass ejections. Hazardous space weather events are rare, but may cause geomagnetic disturbances (GMDs) that affect broad areas of the globe. Such events may pose hazards to space-borne and ground-based CI systems and assets that are vulnerable to geomagnetically induced current, electromagnetic interference, or radiation exposure (see Figure 1 ). Several notable events illustrate space weather hazards, and how their potential impact has broadened over time with technological advances. The 1859 "Carrington event," named for the British solar astronomer who first observed it, caused auroras as far south as Central America and disrupted telegraph communications. In 1972, a GMD knocked out long-distance telephone service in Illinois. In 1989, another GMD caused a nine-hour blackout in Quebec, and melted some power transformers in New Jersey. In 2005, X-rays from a solar storm disrupted GPS signals for a short time. This report provides an overview of federal government policy developed under the existing legislative framework, and describes the specific roles and responsibilities of select federal departments and agencies responsible for the study and mitigation of space weather hazards. Federal Interagency Activities Over the past several decades, the federal government's interest in space weather and its effects has grown. Congress has required individual federal agencies to conduct certain space weather-related activities related to agency missions. However, federal interagency work began in earnest with the establishment of the interagency National Space Weather Program (NSWP) in 1995 by the Department of Commerce's Office of the Federal Coordinator for Meteorology. The program was directed by the NSWP Council that included representatives from interested federal agencies. The NWSP Council coordinated federal space weather strategy development between 1995 and 2015 in partnership with federal agencies, industry, and the academic community. In 2010, Congress directed the White House Office of Science and Technology Policy (OSTP) to improve national preparedness for space weather events and to coordinate federal space weather activities of the NSWP Council. This marked the beginning of a period during which the White House assumed leadership of federal space weather policy. OSTP's National Science and Technology Council established the Space Weather Operations, Research and Mitigation (SWORM) Working Group in 2014 to lead federal strategy and policy development. The NSWP Council was deactivated the following year, when SWORM published a national space weather preparedness strategy, titled the "National Space Weather Strategy" (the 2015 Plan). In 2016, President Obama signed Executive Order (E.O.) 13744, "Coordinating Efforts to Prepare the Nation for Space Weather Events" directing federal space weather preparedness activities to be carried out "in conjunction" with those activities already identified in the 2015 Plan. The SWORM Working Group released an updated national space weather strategy in 2019, titled "The National Space Weather Strategy and Action Plan" (the 2019 Plan). The same year, President Trump signed E.O. 13865, "Coordinating National Resilience to Electromagnetic Pulses," directing the federal government to "foster sustainable, efficient, and cost-effective approaches" to improve national resilience to the effects of electromagnetic pulses. Taken together, the 2019 Plan and E.O. 13865 prioritize investment in CI resilience initiatives over scientific research and forecasting, and represent a shift in policy from that of the previous Administration set forth in the 2015 Plan and E.O 13744. The 2019 Plan focuses on three objectives related to protection of assets, space weather forecasting, and planning for space weather events, and identifies the agencies and departments with responsibilities under each objective ( Figure 2 ). E.O. 13865 directs relevant federal agencies to identify regulatory and cost-recovery mechanisms that the government may use to compel private-sector investments in resilience. This approach differs from most other federal infrastructure resilience initiatives, which generally rely upon voluntary industry adoption of resilience measures. E.O. 13865 applies both to space weather and manmade electromagnetic hazards (such as a nuclear attack) and refers to both types of hazard as electromagnetic pulse (EMP). This may create ambiguity in cases where a given provision could apply either to manmade or natural electromagnetic hazards. For example, E.O. 13865 directs the Secretary of Homeland Security to "incorporate events that include EMPs as a factor in preparedness scenarios and exercises," without specifying whether a space weather event or nuclear attack scenario should be exercised, or which should be prioritized. The fact that E.O. 13865 does not formally supersede E.O. 13744 (which refers solely to space weather) may create further ambiguity in cases where policies of the previous and current Administrations are not in direct alignment, or else reflect differing priorities. Federal agencies typically regardâand refer toâmanmade EMP and naturally-occurring GMDs as related, but distinct phenomena. Select Department and Agency Roles and Responsibilities This section provides an overview of federal roles and responsibilities for space weather-related research and emergency preparedness. Federal agency roles and responsibilities fall into four major categories: early warning and forecasting; research and development (R&D); basic scientific research; risk assessment and mitigation, including modeling and information sharing; and response and recovery. Some agencies have roles and responsibilities in more than one category. This section only includes entities that relevant executive orders or strategies have designated as the federal lead for a specific objective or requirement. This does not include agencies whose role is confined to participation in working groups, harmonizing internal policies with national strategy or directives, contributing refinements to analytical products or models produced by other agencies, or ensuring their own continuity-of-operations in case of a space weather event. Each sub-section includes a summary of the department or agency mission and the relevant authorities under which it operates. If applicable, the agency-specific provisions of the two executive orders currently in forceâE.O. 13744 and E.O. 13865âare listed in a table, followed by information about implementing programs and activities. Provisions applicable only to manmade EMP threats, such as high-altitude nuclear detonations, are excluded. The 2019 Plan is referenced in cases where the executive orders do not provide specific or complete guidance to given federal entities. Departments and agencies are ordered alphabetically for ease of reference. Department of Commerce18 In 1988, Congress authorized the Secretary of Commerce to "prepare and issue predictions of electromagnetic wave propagation conditions and warnings of disturbances in such conditions." The Secretary of Commerce delegated those responsibilities to the National Oceanic and Atmospheric Administration (NOAA). The Secretary of Commerce also directed NOAA to fulfill the department's space weather responsibilities in 2016 under E.O. 13744 and in 2019 under E.O. 13865 ( Table 1 ). Both executive orders direct the Secretary to improve services and partner with relevant stakeholders. The 2016 order refers to the hazard of concern as space weather, while the 2019 order refers to it as natural EMPs. NOAA's space weather work falls primarily under two line offices: National Weather Service (NWS) and National Environmental Satellite, Data, and Information Service (NESDIS). NWS operates and maintains observing systems to support forecasting of space weather including the National Solar Observatory Global Oscillation Network Group, a series of ground-based observatories. NWS also operates the Space Weather Prediction Center, which provides real-time monitoring and forecasting of solar events and disturbances and develops models to improve understanding and predict future events. NESDIS maintains NOAA's space weather data through the National Centers for Environmental Information. It also develops and manages several satellite programs which collect solar and space weather-related observations, including the Geostationary Operational Environmental Satellites (GOES) and the Space Weather Follow-on program. Department of Defense (DOD)25 E.O. 13744 directed DOD to provide space weather forecasts and related products to support military operations of the United States and its partners ( Table 2 ). The FY2018 National Defense Authorization Act (NDAA; P.L. 115-91 ) codified the language in E.O. 13744. According to the FY2018 NDAA It is the sense of Congress that the [Secretary of Defense] should ensure the timely provision of operational space weather observations, analyses, forecasts, and other products to support the mission of the DOD including the provision of alerts and warnings for space weather phenomena that may affect weapons systems, military operations, or the defense of the United States. E.O. 13865 reiterates the E.O. 13744 requirement verbatim, except that it substitutes the phrase "naturally occurring EMPs" for "space weather phenomena." E.O. 13865 also directs DOD to take further steps related to EMP characterization, warning systems, effects, and protection of DOD systems and infrastructure and the United States from EMPs. Air Force The U.S. Air Force is the lead for all DOD and Intelligence Community (IC) space weather information. Air Force weather personnel provide space environmental information, products, and services required to support DOD operations as required. Air Force space weather operations and capabilities support all elements of the DOD and its decisionmakers. The Congressional Budget Office (CBO) estimates that the Department of Defense, primarily the Air Force, allocated $24 million to space weather activities in FY2019. The 557 th Weather Wing, located at Offutt Air Force Base, Nebraska, conducts most of DOD's space weather-related activities. It uses ground-based and space-based observing systems, including the Solar Electro-optical Observing Network (SEON), a network of ground-based observing sites providing 24-hour coverage of solar phenomena; ground-based ionosondes and other sensors providing data in the ionosphere; and space-based observations from the Defense Meteorological Satellite Program. Army The Army has two full-time meteorologists to coordinate space weather support within the Army and with other DOD and federal agencies. Navy The Naval Research Laboratory's (NRL's) Remote Sensing and Space Science Divisions and the Naval Center for Space Technology also contribute to the DOD's space weather activities. For example, the Wide-field Imager for Solar Probe Plus (WISPR), launched in August 2018, was designed and developed for NASA by NRL's Space Design Division. WISPR determines the fine-scale electron density and velocity structure of the solar corona and the source of shocks that produce solar energetic particles. Department of Energy (DOE)32 DOE is responsible for monitoring and assessing the potential disruptions to energy infrastructure from space weather, and for coordinating electricity restoration under authorities granted to it by the White House and Congress. E.O. 13744 directs DOE to protect and restore the electric power grid in the event of a presidentially declared grid emergency associated with a geomagnetic disturbance. E.O. 13865 assigns additional roles and responsibilities to DOE specific to R&D and coordination with the private sector to better understand electromagnetic threats and hazards, and their possible effects on the electric power grid ( Table 3 ). Relevant programs and activities for energy infrastructure protection and threat mitigation are led by the DOE's Office of Cybersecurity, Energy Security, and Emergency Response (CESER) (under the Office of Electricity), and the Federal Energy Regulatory Commission (FERC), the North American Electric Reliability Corporation (NERC), and DOE's national laboratories. Office of Cyber Security, Energy Security, and Emergency Response (CESER) In February 2018, DOE announced the creation of CESER, a new office created from the Office of Electricity Delivery and Energy Reliability (OE). CESER has two main divisions: Infrastructure Security and Energy Response (ISER), and Cybersecurity for Energy Delivery Systems. ISER's mission is "to secure U.S. energy infrastructure against all hazards, reduce the impact of disruptive events, and respond to and facilitate recovery from energy disruptions, in collaboration with the private sector and state and local governments." The DOE has produced a number of reports on GMDs and EMPs. In compliance with the National Space Weather Action plan, ISER produced a 2019 report on geomagnetic disturbances and the impact on the electricity grid. This report was designed to provide a better understanding of GMD events in order to protect the U.S. electricity grid. Prior to the reorganization, DOE's OE collaborated with the Electric Power Research Institute (EPRI), a nonprofit organization that conducts research and develops projects focused on electricity. In 2016, the OE and EPRI together developed the Joint Electromagnetic Pulse Resilience Strategy , and subsequently the DOE Electromagnetic Pulse Resilience Action Plan in January 2017. E.O. 13865 refers to EMPs in two categories: human-made high-altitude (HEMP) and natural EMPsâoften referred to as GMDs by government agencies. These DOE-EPRI documents focus specifically on human-made nuclear threats and categorize GMDs separately from EMPs. However, the 2017 plan notes that "many of the actions proposed herein ... are also relevant to geomagnetic disturbances (GMD), which are similar in system interaction and effects to the E3 portion of the nuclear EMP waveform." Federal Energy Regulatory Commission (FERC) FERC is an independent government agency officially organized as part of DOE. The Energy Policy Act of 2005 (EPAct05; P.L. 109-58 ) authorized FERC to oversee the reliability of the bulk-power system. FERC's jurisdiction is limited to the wholesale power market and the transmission of electricity in interstate commerce. EPAct05 authorized the creation of an electric reliability organization (ERO) to establish and enforce reliability standards subject to FERC oversight. The ERO authors the standards for critical infrastructure protection. These standards, which FERC can approve or remand back, are mandatory and enforceable (with fines potentially over $1 million/day for noncompliance). In November 2018, FERC issued a final rule on reliability and transmission system performance standards for GMDs directing NERC to develop "corrective action plans" to mitigate GMD vulnerabilities, and to authorize time extensions to implement "corrective action plans" on a case-by-case basis. Additionally, the final rule accepts the ERO's submitted research plan on GMDs. North American Electric Reliability Corporation (NERC) In 2006 FERC certified NERC as the ERO for the United States. NERC works closely with the public and private electric utilities to develop and enforce FERC-approved standards. Part of NERC's role includes reducing risks and vulnerabilities to the bulk-power system. In April 2019, NERC created a task force in response to E.O. 13865 to examine potential vulnerabilities associated with EMPs and to develop possible areas for improvement, focusing on nuclear EMP threats. National Laboratories DOE oversees 17 national laboratories that advance science and technology research and development to support DOE's mission. The Los Alamos National Laboratory is currently working on a study of EMP and GMD physical characteristics and effects on critical infrastructure, to be carried out in four phases. Department of Homeland Security (DHS)46 Under Presidential Policy Directive 21 (PPD-21), DHS is the lead U.S. agency for critical infrastructure protection and disaster preparedness. E.O. 13744 and E.O. 13865 assign several roles and responsibilities to DHS specific to space weather and EMPs ( Table 4 ). Both executive orders assign responsibility to DHS for early warning, response, and recovery functions related to space weather preparedness. However, E.O. 13865 also requires DHS to incorporate EMP scenarios into preparedness exercises, to conduct extensive R&D initiatives to better model EMP hazards and develop mitigation technologies, and to enhance critical infrastructure resilience against EMP hazards in coordination with other relevant federal agencies. Relevant programs and activities are managed by the Department's Science and Technology Directorate, as well as two DHS operational components: the Cybersecurity and Infrastructure Security Agency, and the Federal Emergency Management Agency. DHS utilizes an all-hazards risk management approach. Therefore, programs are generally not hazard-specific, but rather may be used to support space weather resilience activities as needed. Science and Technology Directorate (S&T) S&T conducts R&D projects in partnership with federal agencies and the national laboratories, providing tools and analyses to help utilities better predict localized effects of space weather and enhance grid resilience. For example, the Geomagnetic Field Calculator Tool, developed for this purpose by S&T in partnership with NASA, is in the online testing phase. Cybersecurity and Infrastructure Security Agency (CISA) CISA administers public-private partnership programs that provide training, technical assistance, and on-site risk assessments to relevant private-sector and federal partners. CISA, the Department of Energy, and interagency partners are producing technical guidance for electric utilities and other industry stakeholders on mitigation of electromagnetic hazards, which may include space weather. CISA provides long-term risk guidance and recommendations on EMP and other hazards to industry stakeholders through the National Risk Management Center. CISA provides real-time space weather advisories to private sector owner-operators of vulnerable infrastructure on an as-needed basis. Federal Emergency Management Agency (FEMA)51 FEMA develops operations plans and annexes that coordinate use of national resources to address consequences of space weather events. Recent operational documents include the Federal Operating Concept for Impending Space Weather Events (Space Weather Concept of Operations (CONOP)) and the Power Outage Incident Annex and Nuclear/Radiological Incident Annex to the Response and Recovery Federal Interagency Operational Plans. FEMA also periodically incorporates space weather scenarios into all-hazard education, training, and exercise programs. In 2017, FEMA conducted operational and tabletop exercises with federal and state partners. In 2018, FEMA conducted a space weather exercise for senior federal officials. Department of the Interior (DOI)53 The U.S. Geological Survey (USGS) is DOI's lead scientific agency and "provides research and integrated assessments of natural resources; supports the stewardship of public lands and waters; and delivers natural hazard science to protect public safety, health, and American economic prosperity." The Secretary of the Interior has delegated responsibilities from E.O. 13744 and E.O. 13865 to USGS ( Table 5 ). E.O. 13865 requires USGS to enhance understanding of the variations of the Earth's magnetic field associated with all EMPs, manmade and space weather-related, whereas E.O. 13744 specifies only those resulting from solar-terrestrial interactions. USGS conducts space weather-related activities through the Geomagnetism program under the Natural Hazards Mission Area. The Geomagnetism program collects data about the Earth's dynamic magnetic field at 11 observatories. USGS provides these data and resulting products to federal agencies, oil drilling services companies, geophysical surveying companies, the electric-power industry, and several international agencies, among others. For example, NOAA's Space Weather Prediction Center and the Air Force use USGS observatory data in geomagnetic warnings and forecasts. Congress appropriated $1.9 million to the Geomagnetism program in FY2019. Department of State (DOS)56 DOS is the lead foreign affairs agency in the executive branch. Among DOS's responsibilities is negotiating and promoting international norms and practices with respect to outer space. DOS maintains that these efforts contribute to its broader objective of promoting American prosperity through advancing bilateral relationships and leveraging international institutions. E.O. 13744 requires the Secretary of State to lead implementation of U.S. diplomatic and public diplomacy efforts to enhance the international community's capacity to respond to space weather events. Similarly, E.O. 13865 directs the Secretary of State to lead U.S. engagement with allies and partners to enhance resilience to the effects of EMPs, which may include space weather (see Table 6 ). DOS's Bureau of Oceans and International Environmental and Scientific Affairs has traditionally been responsible for advancing U.S. diplomatic engagement on these matters. Bureau of Oceans and International Environmental and Scientific Affairs (OES) Congress established the Bureau of Oceans and International Environmental and Scientific Affairs in Section 9 of the Department of State Appropriations Authorization Act of 1973 ( P.L. 93-126 ). OES is responsible for building international partnerships in multilateral fora to strengthen both U.S. and international resilience to extreme events, including those pertaining to space weather. For example, OES's Office of Space and Advanced Technology leads U.S. delegations to the United Nations (U.N.) Committee on the Peaceful Uses of Outer Space (COPUOS). In 2017, OES participated in a workshop co-hosted by the United Nations and NASA on the International Space Weather Initiative (ISWI). The ISWI was first launched in 2009 to advance space weather science through deploying instruments to collect relevant space weather data, analyzing and interpreting the data obtained from those instruments, and communicating the results of that analysis to the public. The United States and 43 other U.N. member states that participated in this workshop found that strengthening the international framework for space weather services could be accomplished through several means. These included further improving ground and space-based space weather observation infrastructure, sharing best practices for space weather risk assessment and mitigation, increasing coordination on space weather forecasting services, and developing space weather mitigation plans for integration into broader contingency planning for disaster management. These action items are consistent with DOS's responsibilities to contribute to the realization of the 2019 Plan's three key objectives. Efforts by COPUOS to make progress in these and other focus areas are ongoing. National Aeronautics and Space Administration (NASA)65 Under 51 U.S.C. Â§20301, NASA is responsible for scientific research on the "Sun-Earth connection through the development and operation of research satellites and other means." While E.O. 13865 does not address NASA, E.O. 13744 further directs NASA to (i) implement and support a national research program to understand the Sun and its interactions with Earth and the solar system to advance space weather modeling and prediction capabilities applicable to space weather forecasting; (ii) develop and operate space-weather-related research missions, instrument capabilities, and models; and (iii) support the transition of space weather models and technology from research to operations and from operations to research. The Heliophysics Division of NASA's Science Mission Directorate supports fundamental research on the sun, some of which is important for space weather prediction, but most of which is less directly applicable. Congress appropriated $720 million to the Heliophysics Division in FY2019. CBO estimates that NASA allocated $264 million to space weather activities in FY2019. The Heliophysics Division funds intramural and extramural research and operates a fleet of research spacecraft in Earth orbit and beyond to study the sun, the solar wind, and their interaction with Earth and the rest of the Solar System (see Figure 3 ). When a space weather event or disturbance is observed, NASA also provides research data and modeling results to NOAA for operational use by the Space Weather Prediction Center. In addition to its research activities, NASA has unique operational concerns regarding space weather. First, while multiple agencies and the private sector operate satellites in Earth orbit, above the protection provided by Earth's atmosphere, NASA also has spacecraft in orbits far beyond Earth for planetary exploration and other missions. Earth's magnetic field provides significant protection against space weather for Earth-orbiting satellites, but spacecraft outside Earth's magnetosphere do not benefit from this protection and so have additional requirements for radiation shielding and other countermeasures. Second, NASA is the only U.S. agency with human astronauts in space, so it has unique human safety concerns. Human safety concerns are particularly significant for planned future missions to the Moon and other destinations that are beyond Earth's protective magnetosphere. National Science Foundation (NSF)69 Congress established the NSF to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." E.O. 13744 further directs NSF to "support fundamental research linked to societal needs for space weather information through investments and partnerships, as appropriate." NSF supports space weather research in two directorates: (1) the Geosciences Directorate, including through the Atmospheric and Geospace Sciences division (AGS) and the Office of Polar Programs (OPP), and (2) the Mathematical and Physical Sciences (MPS) Directorate, through the Astronomical Sciences division (AST). E.O. 13865 does not address NSF. NSF reports that FY2018 space weather funding totaled approximately $105 million, including about $45 million for AST. CBO estimates that NSF allocated $22 million to space weather activities in FY2019. NSF primarily provides grants to research institutions to conduct scientific studies, including universities and private entities that focus on fundamental research questions related to space weather and its impacts. The AGS division supports both basic sciences research and observational and cyber-infrastructure facilitiesâincluding the National Center for Atmospheric Research's High Altitude Observatoryâto improve understanding of the dynamics of the sun, Earth's atmosphere, and near-space environment, and how the sun interacts with Earth's atmosphere. OPP support includes the Antarctic and Astrophysics Geospace program and the IceCube Neutrino Observatory (jointly funded with the MPS Division of Physics). In the ATS divisionâthe federal steward for ground-based astronomy in the United Statesâobservations focus mainly on the sun, and activities include management of the National Solar Observatory (NSO) Integrated Synoptic Program and the Daniel K. Inouye Solar Telescope (DKIST). According to NSF, DKIST will play an important role in enhancing the fundamental understanding of space weather and its drivers. In addition, NSF supports the development of numerical models of the space weather chain, including the sun, solar wind, and geospace. E.O. 13744 further directs NSF, in collaboration with other federal agencies, to identify mechanisms for advancing space weather observations, models, and predictions, and for sustaining and transitioning appropriate capabilities from research to operations and operations to research. As noted in the agency's March 2018 announcement regarding space weather operations to research proposals, NSF's primary role in space weather readiness efforts is support for basic research that advances fundamental understanding of space weather and related processes, including "the generation of solar storms, their propagation through the interplanetary medium, and their impact on the near-Earth space environment." Federal Agency Spending on Space Weather Activities A comprehensive account of total federal agency spending on space weather-related activities is not available. In a cost estimate for the Space Weather Research and Forecasting Act ( S. 881 in the 116 th Congress), CBO estimated that the federal agencies in the National Space Weather Program and the Space Weather Operations, Research, and Mitigation Working Group "allocated a combined total of nearly $350 million to activities related to space weather" in FY2019. CBO estimated that the National Aeronautics and Space Administration (NASA) allocated the majority ($264 million) of the $350 million total. Total federal agency allocations towards space weather activities may differ from year to year. For example, CBO estimated federal agencies that were a part of the National Space Weather Program "spent a total of $160 million" in FY2016 on activities related to space weather. Legislation in the 116th Congress The 116 th Congress continues to consider and pass legislation related to space weather research, forecasting, preparedness, response, and recovery. The National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92) Congress enacted S. 1790 in December 2019 as the National Defense Authorization Act for Fiscal Year 2020 (2020 NDAA). The 2020 NDAA amended Sections 320 and 707 of the Homeland Security Act of 2002 ( P.L. 107-296 ) to enact a series of homeland security-related provisions that parallel the E.O. 13865 framework for critical infrastructure resilience and emergency response. See Table 7 for a summary of the new requirements. The 2020 NDAA also repealed Section 1691 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ) , which authorized a "Commission to Assess the Threat to the United States from Electromagnetic Pulse Attacks and Similar Events." The Congressional EMP Commission was to conduct an EMP threat assessment and make policy recommendations to Congress. Senior commission members have publicly claimed a prominent role in developing E.O. 13865, which "seeks to implement core recommendations of the Congressional EMP Commission on an accelerated basis." House-passed versions of the 2020 NDAA cited the publication of E.O. 13865 when repealing Section 1691. Other provisions in the 2020 NDAA require the National Guard to clarify relevant "roles and missions, structure, capabilities, and training," and report to Congress no later than September 30, 2020, on its readiness to respond to electromagnetic pulse events affecting multiple states. The Space Weather Research and Forecasting Act (S. 881) and Promoting Research and Observations of Space Weather to Improve the Forecasting of Tomorrow (PROSWIFT) Act (H.R. 5260) These similar but not identical bills, introduced by Senator Gary Peters and Representative Ed Perlmutter respectively, set forth provisions designed to improve the ability of the United States to forecast space weather events and mitigate the effects of space weather. The bills provide statutory authority for an interagency working group (such as SWORM, which was established administratively by the NSTC in 2014). Other major provisions of the bills concern federal agency roles and responsibilities, the establishment of an advisory group, R&D, data sharing, and certain congressional reporting requirements. S. 881 also includes provisions related to the protection of critical infrastructure. The Senate Committee on Commerce, Science, and Transportation ordered S. 881 to be reported without amendment in April 2019. S. 881 was reported out of the committee and placed on the Senate Legislative Calendar in December 2019. H.R. 5260 was referred to several House committees for consideration in November 2019. Previous versions of these bills were introduced in the 114 th and 115 th Congresses.


Introduction Swiping a card to pay for something seems routine today; however, at one point in recent history, a piece of plastic with a magnetic strip capable of electronically communicating payment information between the banks of a consumer and a merchant was completely unprecedented. Financial technology, or fintech , refers to the broad subset of financial innovations that apply new technologies to a financial service or product. Although the term was coined only recently, it likely would have been applied to a broad set of innovations, such as the advent of automated teller machines, or ATMs, in the 1960s and mobile payments in the 2000s. There is no singular definition of fintech, often making policy discussions around this topic complicated. Further, U.S. financial system regulation is fragmented across many regulators by industry, business practice, and geographical jurisdiction, so regulating fintech is multifaceted. Each financial regulator has a different mandate, creating gaps and overlaps among their jurisdictions. Regulators have used various policy tools to approach the new technologies in a manner consistent with their mandate, which impacts both institutions under their direct jurisdiction and new firms that do not cleanly fit under one regulator's jurisdiction. Recent congressional interest in fintech has led to several hearings, the creation of fintech task forces, and legislation pertaining to one or multiple financial system regulators. This report examines activities and proposals initiated after the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203 ) that are relevant to fintech. These can include fintech actions as defined by a regulator or actions pertaining to areas of financial services that intersect with technology but may not be explicitly considered fintech. Financial regulators generally fall into three groups, which are responsible for (1) depository institutions, (2) consumer protection, and (3) securities. Their approaches may include the following: writing new rules or amending existing ones; issuing guidance to clarify the applications of the rules to new types of business lines; creating new types of charters for institutions; using supervisory authorities to examine partnerships between regulated and unregulated entities; issuing enforcement actions to companies that violate regulations or laws; or establishing new offices and staffing experts to serve as outreach points-of-contact for relevant industry concerns. Table 1 summarizes the federal regulators discussed in this report, including their scope, and relevant authorities. The depository institution regulators discussed in this report include the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA)âthese are referred to as banking regulators. The consumer protection agencies include the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). The securities regulators include the Securities and Exchange Commission (SEC) and the Commodity Futures Trade Commission (CFTC). More information on the mandates and relevant authorities of these regulators can be found in Appendix A . Banking Regulators: Approach to Fintech The banking regulatorsâthe Federal Reserve, FDIC, OCC, and NCUAâface particular fintech-related challenges regarding how to ensure banks and credit unions can efficiently and safely interact with nonbank fintech companies. Sometimes fintech companies partner with and offer services to banks or credit unions. Other times, they seek to compete with banks by offering bank or bank-like services directly to customers. In some circumstances, banks themselves can develop their own fintech. Given their broad responsibilities, banking regulators can engage with and respond to fintech in numerous ways, including by amending rules and issuing guidance to clarify how rules apply to new products; supervising the relationship banks form with fintech companies; granting banking licenses to fintech companies; and conducting outreach with new types of firms to facilitate communication between industry and regulators. Examples of these regulatory actions are discussed in more detail below. Each of the agencies has slightly different regulatory scope, so the efforts described in the sections below reflect each regulator's interest in balancing the risks and benefits of financial technologies. Partnerships with Technology Service Providers In general, banking regulators have not been active in issuing fintech-specific rules in the last 10 years. Instead, regulators have focused more heavily on issuing guidance on how new products and new relationships fit into the current regulatory framework. Relationships between banks and technology service providers (TSPs)âthird-party partnershipsâare particularly relevant because many TSPs are fintech companies. Banking regulators use their authority to examine the operations of these third-party partnerships as a critical tool to supervise the interactions between banks and nonbank technology firms. Further, third-party supervision demonstrates how regulators have used and applied the existing framework to fintech activities. Updated Guidance on Bank Partnerships with Technology Service Providers From a banking regulator's standpoint, an institution can be a bank, a nonbank, or a nonbank that partners with a bank. Bank regulators have jurisdiction over banks and their partnerships with nonbanks. Some insured depository institutions opt to partner with TSPs to receive software and technical support. Often, banks will use TSPs to support critical business needs, such as core processing, loan servicing, accounting, or data managementâareas where fintech companies have become active market participants. As banks increasingly rely on TSP partnerships, regulators are becoming increasingly interested in how banks manage the risks associated with these partnerships. Banking regulators require a financial institution that chooses to partner with a TSP to ensure that the activities performed by the TSP for the institution meet the same regulatory requirements as if they were performed by the bank itself. Banking regulators' broad set of authorities to supervise TSPs are provided by the Bank Service Company Act (BSCA; P.L.87-856). Specifically, the BSCA provides banking regulators with authority to examine and regulate third-party vendors that provide services to banks. The banking regulators periodically issue and update guidance pertaining to third-party vendors. They issued interagency guidelines in 2001 that, among other things, require banks to provide continuous oversight of third-party vendors such as TSPs to ensure they maintain appropriate security measures. In 2017, the FDIC's Office of Inspector General issued an evaluation of TSP contracts, noting that many of the sampled institutional relationships did not adequately address the risks associated with TSP partnerships. In 2019, the FDIC issued a financial institution letter on TSP contracts, outlining the statutory obligations of firms pursuant to the BSCA and the Gramm-Leach-Bliley Act ( P.L. 106-102 ) and encouraging financial institutions to ensure service provider contracts adequately address business continuity and incident response risks. Brokered Deposits with Technology-Based Tools Rulemaking with a specific focus on fintech companies is relatively infrequent, but banking regulators occasionally issue rules or proposed rules that have some tangential impact on fintech companies, such as a recently proposed FDIC rule on brokered deposits. This proposed rule is another example of how regulators have used an existing regulatory framework to potentially accommodate fintech developments. FDIC Proposed Rulemaking on Brokered Deposits Generally, banks hold two types of deposits: core deposits and brokered deposits. Core deposits are funds individuals or companies directly place in checking and savings accounts, whereas brokered deposits are funds that a third-party broker places in a bank on behalf of a client, typically to maximize interest earned and possibly to ensure that the accounts are covered by the FDIC's $250,000 insurance limit. Brokered deposits are considered less stable than core deposits, as the former is typically moved around frequently depending on market conditions. If a bank is not considered well-capitalized by its regulator, the regulator can prohibit the bank from accepting brokered deposits. Consumers increasingly use nonbank technology-based tools, such as mobile phones and fintech apps, to move money between accounts. Under certain circumstances, rules against accepting brokered deposits could apply to money transfers using nonbank technologies. The FDIC, responding to concerns that regulators have applied the rules too broadly, published a notice of proposed rulemaking in December 2019 that would allow deposits to enter the banking system through new technological channels without being subject to brokered deposit rules. Regulatory Sandboxes Regulators occasionally create programs through which firms can experiment with new products in a way that allows industry and regulators to better understand how new technologies can impact consumers and the market. These programs are sometimes referred to as sandboxes or greenhouses . As a state-level example, Arizona created such a program in March 2018. At the federal level, these programs are being discussed but have not fully taken shape. Among the banking regulators, the OCC has proposed a regulatory sandbox program, discussed below. OCC Proposed Innovation Pilot Program In April 2019, the OCC proposed a voluntary Innovation Pilot Program to support the testing of innovative products, services, and processes that could significantly benefit consumers, businesses, and communities, including those that could promote financial inclusionâthe OCC is considering public comments on the program as of the date of this report. This proposed program is similar to the concept of a regulatory sandbox or greenhouse, which is discussed in the " Sandboxes and No-Action Letters to Promote Innovation " section, below. Some key characteristics and considerations of the proposed program include the following: The pilot would be open to banks, their subsidiaries, and federal branches and agencies, including those partnering with third parties to offer innovative products, services, or processes. It would also be open to banks working together, such as in a consortium or utility. The OCC is considering a suite of regulatory tools during the pilot to communicate with banks, including interpretive letters, supervisory feedback, and technical assistance from OCC subject-matter expertsâthe tools would not include statutory or regulatory waivers. The OCC may address the legal permissibility of a product or service that a bank proposes to test as part of the program. The OCC would expect banks to address risks to consumers and would not permit into the program proposals that have potentially predatory, unfair, or deceptive features. Bank Charters for Fintech Companies One foundational way banking regulators can regulate institutions not traditionally covered by banking regulations, such as fintech companies, is to grant a banking license to a new type of firm. By doing this, the institution becomes covered by the regulatory framework that applies to other depository institutions, and the regulator can apply a similar supervisory framework to the new institution's operations. The OCC and FDIC recently have taken measures to consider charters for nonbank companies. The OCC's efforts are specifically targeted to fintech companies, and the FDIC's efforts could affect a fintech company's opportunity to become a chartered bank. OCC Special Purpose National Bank Charters for Fintech Companies Many nonbank financial companies are licensed at the state level. Thus, a fintech company wanting to do business across the United States would need to obtain 50 different state licenses and meet a complex set of 50 state regulations and standards in order to do so. In response to concerns about this complexity, the OCC requested comments in 2016 on a proposal to offer national bank charters to fintech companies. In 2018, it announced that it would begin offering charters to fintech companies. The OCC's charter initiative has been controversial. State regulators and consumer advocates have argued that granting such charters would inappropriately allow federal preemption of important state-level consumer protections, and that the OCC does not have the authority to grant bank charters to these types of companies. State regulators have filed lawsuits, and the matter is the subject of ongoing legal proceedings. Industrial Loan Company Charters and the FDIC24 In addition to traditional bank charters, several states offer a type of bank charter for industrial loan companies (ILCs). Recently, fintech firms have begun to explore these types of charters. ILCs chartered in some states are allowed to accept certain types of deposits if the FDIC has approved the ILC for deposit insurance. Given this condition, the FDIC is considering whether or not to grant deposit insurance to fintech firms; doing so would allow ILCs to operate, under certain state charters, what would be in effect full-service, FDIC-insured banks. Several technology-focused companies have applied to establish new ILCs. ILCs are regulated in two unique ways, which make them both attractive and controversial to certain fintech companies seeking to have deposit-taking bank operations: ILCs can be owned by a nonfinancial parent company, creating an avenue for commercial firms, such as fintech companies, to own a bank. Critics of ILCs argue this runs counter to the long-standing U.S. policy of separating banking and commerce. In some circumstances, these parent companies are not considered a bank-holding company; therefore a fintech company owning a bank as a nonfinancial parent company might not be subject to supervision by the Federal Reserve, pursuant to the Bank Holding Company Act of 1956 (BHCA; P.L. 84-511). Critics argue this would result in under regulation of an ILC parent company. In response to concerns over ILCs, the FDIC and Congress have in the past implemented moratoriums on approving FDIC-insurance for new ILCs. No new ILC charters have been granted since the end of the most recent moratorium in 2013, prompting ILC proponents to argue an unofficial moratorium is in effect without regulatory or statutory basis. By applying to establish new ILCs, technology companies have renewed public interest in ILCs in general. If the FDIC generally begins granting deposit insurance to ILCs, this could create a path for nontraditional banking companies beyond fintechs to offer bank services. FDIC Notice of Proposed Rulemaking on Parent Companies of Industrial Banks and Industrial Loan Companies The BHCA establishes the terms and conditions under which a company can own a bank in the United States and grants the Federal Reserve the authority to regulate these holding companies. In 1987, Congress enacted the Competitive Equality Banking Act of 1987 (CEBA; P.L. 100-86 ) to provide exemptions to permit certain financial and commercial companies to own and control industrial banks without becoming a bank-holding company under the BHCA. In granting deposit insurance for any insured depository institution, including industrial banks, the FDIC must assess the safety and soundness of the proposed institution and the risk posed to the Deposit Insurance Fund. Recent deposit insurance filings involving industrial banks have proposed ownership and control structures that would not be subject to federal consolidated supervision. To codify and enhance the FDIC's supervisory process with respect to these institutions, the FDIC issued a notice of proposed rulemaking on March 31, 2020, which would require certain conditions and commitments for agency approval of applications that would result in an insured industrial bank or ILC becoming a subsidiary of a company that is not subject to supervision by the Federal Reserve. The proposed rule would also require that the parent company and industrial bank or ILC enter into one or more agreements with the FDIC. Consumer Protection and Payments Innovation Many regulators have expressed interest in developing programs that facilitate innovation. Innovation can lead to new types of products for consumers, such as mobile payments, but it can also create obstacles for consumers to manage. Banking regulators and other financial system regulators, such as the Consumer Financial Protection Bureau (CFPB) (see " Consumer Protection Agencies: Approach to Fintech "), implement and promulgate rules pertaining to the payments system. (See Appendix B for these rules and other regulatory interests in payments innovation.) The payments system provides a few examples where new technologies create the potential for both benefits and risks to consumers. Federal Reserve FedNow Service The Federal Reserve's proposed FedNow Service payments initiative is one example of a regulator facilitating a new product for consumers. The Federal Reserve operates or regulates important elements of the payments and settlement system, including retail payment networks such as the FedACH network, multilateral settlement services such as the National Settlement Service, and real-time gross settlement systems such as Fedwire Funds Service. Recently, the Federal Reserve announced plans to develop the FedNow Service: a real-time payments and settlement system for peer-to-peer and business-to-consumer payments. The FedNow Service is expected to impact consumers as they continue to conduct commerce using electronic payments, mobile phones, and apps. Transacting in this way can lead to better outcomes for consumer budgeting, as transactions are settled in real time, but it also may impact a consumer's ability to resolve errors, as instantaneous payments are harder to stop or return. Given the importance of safety in the payments system, the Federal Reserve and a private organization called the Clearing House have both established real-time payments to create competition in the market for payments and settlement services, with the idea that competition will increase market discipline and enhance resiliency in the system. The Federal Reserve anticipates the FedNow Service will be available in 2023 or 2024. Outreach Offices for Stakeholders Each depository regulator has put together a working group or formal office to understand how new technologies may affect institutions under their jurisdictions and to establish a point of contact for industry. A summary of these efforts is presented below. Table B-1 in Appendix B provides a synopsis of the offices established by each financial regulator discussed in this report, and Appendix C summarizes other efforts, such as research programs, notable fintech conferences, and working groups. Federal Reserve Innovation Program In December 2019, the Federal Reserve established a series of programs to support financial innovation in the financial services marketplace. Part of this effort includes offering "office hours" to supervised financial institutions and nonbank fintech firms looking for information about financial innovation. These office hours are held at the various Federal Reserve Banks. The Federal Reserve also established a new website, which contains information about related supervisory information, regulatory guidance, staff speeches, publications, research, and events. The Reserve Banks have created working groups to address fintech issues, which are summarized in Appendix C . OCC Office of Innovation In 2015, the OCC began developing a "Responsible Innovation" framework to address issues of financial services innovations. This framework is summarized in Table C-1 of Appendix C . As part of the framework, the OCC created a group to meet with banks, fintech companies, consumer groups, regulators, and other stakeholders to discuss various issues, concerns, and areas of interest relevant to fintech. In 2017, the OCC formally established the Office of Innovation to implement its Responsible Innovation framework and provide a central point of contact for requests and information related to innovation. FDIC Tech Lab The FDIC recently has taken steps to establish fintech-specific programs. It created its own version of an office of innovation, the FDIC Tech Lab, or "FDiTech," in October 2018. The FDIC Tech Lab is intended to promote, coordinate, and understand the role of new innovations among technology firms, financial institutions, and other regulators. The Tech Lab's stated goals are to engage with financial and technology companies to identify opportunities to improve the safety and soundness of insured depository institutions, promote competition, increase economic inclusion, support risk management, and facilitate efficient resolution of failed institutions. Consumer Protection Agencies: Approach to Fintech The mandate for the consumer protection agenciesâCFPB and FTCâis largely to ensure that consumers are unharmed by the practices of businesses under their jurisdiction while maintaining a competitive marketplace. Within the context of fintech, there are tradeoffs between these objectives. For instance, encouraging firms to offer new kinds of consumer-friendly financial services can help create a competitive market, but the new products also can create the potential for unforeseen risks to consumers. Similar to the banking regulators, the CFPB and FTC issue and promulgate regulations on issues pertinent to fintech, such as payments and data security, and both agencies have created outreach offices. The consumer protection agencies, however, tend to use enforcement actions as tools to manage the effects of fintech on the financial system to a greater extent than banking regulators. This partly is because the consumer protection agencies are responsible for implementing and enforcing consumer protection laws for many nonbank financial companiesâunlike the banking regulators, which generally do not have enforcement authorities for nonbank financial companies. The consumer protection agencies use enforcement actions to balance their mandates with respect to fintechs in two additional ways: protect consumers by levying enforcement actions against firms that violate consumer protection laws, and promote market competition and facilitate innovations that benefit consumers by creating safe harbors for firms from enforcement actions in order to encourage firms to develop new technologies and solve challenges facing consumers. Whereas the CFPB has a broad range of regulatory authorities relevant to fintech, the FTC is somewhat limited to enforcement actions for many fintech activities, as it has some investigative authority but no supervisory authorities. Examples of these approaches are explored in more detail below. Enforcement Actions to Ensure Consumer Protection One way consumer protection agencies implement their legal authorities is through enforcement actions: agencies can take a number of actions to levy penalties against or stop firms that violate law or regulation. The FTC's enforcement actions include a number of orders that pertain to fintech firms. FTC Fintech Enforcement Actions The FTC enforces federal consumer protection laws that prevent fraud, deception, and unfair business practices, as well as federal antitrust laws that prohibit anticompetitive mergers and other business practices that could lead to higher prices, fewer choices, or less innovation. Companies that violate laws under FTC jurisdiction are liable for civil penalties for each violation. Over the past decade, the FTC has brought over 20 cases against telecommunications firms, money service businesses, prepaid card companies, and technology firms, among others, with operations relevant to fintech and in violation of FTC competition and fairness rules. Table 2 describes the outcomes of selected recent FTC fintech-related enforcement actions. Sandboxes and No-Action Letters to Promote Innovation Consumer protection agencies occasionally create policies or programs that temporarily shield firms from enforcement actions if they meet certain conditions. In the past few years, the CFPB has built upon its No-Action Letter (NAL) policy, which provides some assurances that if a company offers a product or service in a specific way, the agency will withhold enforcement actions for that particular activity. With respect to fintech, the CFPB has identified the NAL policy as a way to encourage firms to produce products and disclosures that may benefit consumers. Consumer protection agencies also promote innovation through programs such as sandboxes or greenhouses, which can allow firms to trial new ideas and products while being subject to a subset of the existing regulatory framework or while being granted safe harbor from certain enforcement actions (see " Regulatory Sandboxes "). CFPB No-Action Letter Policy In 2016, the CFPB introduced its NAL policy to withhold enforcement actions against qualifying consumer-friendly innovations and to help inform the CFPB on new products and services being offered. Although the CFPB anticipated limited participation in this original NAL policy, it announced its first NAL in 2017 to a company that used alternative data and machine learning in making credit underwriting and pricing decisions. To encourage more robust participation, the CFPB revised its NAL policy in 2019, amending the application and review process and reportedly strengthening its commitment to provide safe harbor to qualifying firms. CFPB Compliance Assistance and Revised Trial Disclosure Sandbox Policies The CFPB created sandbox programs to encourage certain firms to test consumer financial services by granting the firms temporary safeguards from liability and enforcement actions. In addition to creating the NAL policy, the CFPB created the Compliance Assistance Sandbox (CAS) policy to enable some firms to test certain innovative products by providing the firms with temporary safe harbor from liability under certain statutes. The CFPB expects participation in the CAS policy to be time-limited, typically two years, with extensions available in specific circumstances. In addition, Dodd-Frank allows the CFPB to provide trials for companies to test new types of disclosuresâwith safeguards from certain liabilities and on a basis that is limited in time and scopeâto make them more effective for consumers. The CFPB first released a Trial Disclosure Policy (TDP) in 2013 and updated it in 2019 to encourage more robust participation. Outreach, Coordination, and Research Programs Similar to the banking regulators, the CFPB has an office that serves as a point of contact for industry and other stakeholders. The CFPB also created a network to facilitate policy coordination pertaining to fintech among the federal and state financial regulators. The FTC, to support its investigation authorities, has done research and outreach to try to better understand the ways fintech may impact consumer protection and market competition. These programs are briefly explained below, and additional information regarding these programs can be found in Appendix C . CFPB Office of Innovation In 2012, the CFPB created Project Catalyst to encourage "consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services" by communicating and engaging with industry innovators. Through Project Catalyst, the CFPB studied issues surrounding access to credit, safeguarding financial records, cash flow management, student loan refinancing, mortgage servicing platforms, credit reporting, and peer-to-peer money transfers. The CFPB also held office hours, provided technical assistance, and offered an earlier version of the above-mentioned TDP and NAL policy programsâbefore the new Office of Innovation was createdâdesigned to encourage firms to produce consumer-friendly innovations by safeguarding those products from CFPB enforcement actions. In 2018, the CFPB rebranded Project Catalyst, introducing a suite of policies and programs to centralize policies pertaining to consumer-focused innovation through a newly established Office of Innovation. The office provides a single point of contact for firms looking to participate in the revised NAL policy and sandbox policy programs, explained above. CFPB American Consumer Financial Innovation Network In September 2019, the CFPB launched the American Consumer Financial Innovation Network (ACFIN) of state regulators. The CFPB created ACFIN to enhance coordination among federal and state regulators and to facilitate financial innovation as regulators develop new regulations and apply existing ones. The network is open to all state and federal financial regulators, as well as state attorneys general. FTC Investigation of Fintech Issues The FTC develops policy and research tools through hearings, reports, workshops, and conferences to support its investigation authorities. Since 2012, the FTC has hosted numerous events and developed several reports on mobile payments, big data, marketplace lending, cryptocurrency scams, and small business financing. For example, the FTC has hosted several forums on fintech issues, including one on marketplace lending in June 2016, crowdfunding and peer-to-peer payments in October 2016, and artificial intelligence and blockchain technology in March 2017. In 2018, the FTC hosted an event on cryptocurrency scams for consumer groups, law enforcement, researchers, and the private sector as part of its consumer protection work. Securities Regulators: Approach to Fintech60 The securities regulatorsâthe SEC and the CFTCâare focused on any securities-related activities, including those of fintech companies. Examples would include a fintech company raising capital by issuing equity through an initial coin offering or a firm creating a new technology for derivatives contracts. Given their mandate, the securities regulators have used a range of regulatory tools, largely focused on clarifying whether and how the existing regulatory framework applies to new types of technologies, including the following: writing rules and guidance to clarify how existing rules apply to new types of approaches to securities; issuing enforcement actions against any fintech firms that may violate the securities laws under their jurisdiction; and setting up fintech outreach offices to serve as points of contact for stakeholders. Examples of these regulatory approaches are provided below. Application of Existing Securities Rules to Fintech The SEC recently published guidance and rules on new capital-raising measures known as Initial Coin Offerings (ICOs) and crowdfunding, as well as on issues regarding automated investment advice ("robo advisors"). Both the SEC and CFTC have used their broad enforcement authorities to issue enforcement actions against digital asset practices that violated rules under their respective jurisdictions. Further, the SEC used its NAL policy (similar to that used by the CFPB, discussed above) to provide safe harbor to digital asset related companies. These initiatives are summarized below. SEC Guidance for Initial Coin Offerings Firms that issue cryptocurrencies may consider an ICO to raise capital by issuing digital assets to investors. In 2019, the SEC published a framework to build on 2018 guidance for companies to understand whether their ICOs qualify as securities and are subject to SEC regulation. The process of issuing an ICO is similar to a public companies' Initial Public Offeringâa well- regulated and commonplace way to raise capital in equity markets for newly public companiesâin that both aim to raise funding, but confusion may exist among investors and industry over whether digital assets are treated the same way under SEC regulation. SEC Crowdfunding Final Rule The Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106 ) contains provisions that establish a regulatory structure for startups and small businesses to raise capital through issuing securities using internet-based crowdfunding. Effective May 2016, the SEC adopted a rule to implement these provisions, thereby governing the offer and sale of such securities and providing a framework for regulating certain registered funding portals and other intermediaries. SEC Guidance for Automated Investment Advice The SEC has issued guidance for robo advisors, which provide automated investment advice. The staff guidance serves to inform registered and other investment advisers on how to comply with the relevant securities statutes. Compliance requires firms or sole practitioners compensated for advising others about securities investments to register with the SEC and conform to regulations designed to protect investors. SEC and CFTC Digital Asset Enforcement Actions and No-Action Letters The SEC has broad enforcement authorities, granting it the ability to suspend business practices through injunctions and to bring administrative proceedings, such as cease and desist orders. The SEC manages a robust enforcement action program across several industries and has issued 48 such actions against digital asset-related companies since 2013. Similarly, the CFTC issues enforcement actions to enforce derivatives laws; since 2018, it has issued more than 20 enforcement actions against firms related to Bitcoin and other cryptocurrency fraud schemes. In addition to its enforcement authority, the SEC grants NALs in some instances to provide relief from the SEC taking an enforcement action against a company. The SEC provided three such letters to digital asset companies in 2019. Outreach Offices for Stakeholders SEC Strategic Hub for Innovation and Financial Technology In 2018, the SEC created the Strategic Hub for Innovation and Financial Technology (FinHub) to serve as a resource for public engagement on fintech issues, such as distributed ledger technology, digital assets, automated investment advice, digital marketplace financing, and artificial intelligence/machine learning. FinHub, developed from numerous SEC internal working groups, also is designed to make the SEC's fintech work more accessible to industry and serve as a platform to inform the SEC's understanding of new financial technologies. LabCFTC LabCFTC is the focal point of the CFTC's efforts around financial innovation and is designed to make the CFTC more accessible to innovators. LabCFTC also serves as a platform to inform the CFTC's understanding of new technologies, providing information for CFTC staff that may influence policy development. LabCFTC seeks to promote responsible innovation to improve the quality, resiliency, and competitiveness of markets. It also aims to accelerate CFTC engagement with new technologies that may enable the CFTC to carry out its mission responsibilities more effectively and efficiently. There are two main components to LabCFTC: (1) GuidePoint, which creates a dedicated point of contact for stakeholders, and (2) CFTC 2.0, which serves as a beta testing environment for new technologies. Appendix A. Summary of Financial Regulator Mandates Banking Regulators Banks and credit unions serve a vital role in the economy. Thus, they are subject to a strong regulatory framework that requires institutions operate in a safe and sound manner. Depository institutions are routinely examined to ensure their business lines are healthy and to make sure they comply with various laws. These regulators also write and provide guidance on rules for depository institutions to implement their legal authorities over certain business practices. Although the mandates and authorities for each agency are a bit different, the agencies all serve as primary federal regulators for some kind of depository institution. The type of depository institution depends on whether a bank is chartered at the federal or state level and whether it is a member of the Federal Reserve System. (See Table A-1 .) Federal Reserve System The Federal Reserve Act of 1913 (P.L. 63-43) established the Federal Reserve as the central bank of the United States, comprising the Board of Governors and 12 Federal Reserve Banks. The Board generally sets policy, which is carried out by the Reserve Banks. In addition to its responsibility as the central bank to set monetary policy, the Federal Reserve is also responsible for supervising and regulating state banks that are members of the system and all bank-holding companies. The Federal Reserve also has an important role in operating the payments and settlement system. Table B-2 summarizes the Federal Reserve's notable recent activities in the payments system. Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) was established in 1863 as a bureau of the U.S. Department of the Treasury. The OCC is the primary federal regulator for nearly 1,200 national banks, federal savings associations, and federal branches and agencies of foreign banks operating in the United States. The OCC grants national bank charters, which allow the charter holder to legally operate as a bank. Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC), established by the Banking Act of 1933 (P.L. 73-66) and largely shaped into its modern form by the Federal Deposit Insurance Act of 1950 (P.L. 81-797), insures the deposits of banks and serves as the primary federal regulator for state-chartered banks and thrifts that are not members of the Federal Reserve. The FDIC manages the Deposit Insurance Fund, which provides the funds necessary to insure deposits and to resolve failed banks. The FDIC provides deposit insurance for deposits at all U.S. banks, both national and state, but most of the banks the FDIC supervises are smaller institutions, known as community banks. National Credit Union Administration In 1970, Congress amended the Federal Credit Union Act to establish the National Credit Union Administration (NCUA) as the regulator for the federal credit union system (P.L. 91-206). The NCUA supervises and insures deposit shares at federal credit unions and is responsible for resolving failing institutions. Consumer Protection Agencies Consumer protection laws and regulations are mainly within the jurisdiction of two agencies. The Consumer Financial Protection Bureau (CFPB) regulates certain financial firms for unfair, deceptive, and abusive acts and practices, as well as for compliance with several consumer protection laws. In addition, many firmsâboth financial and nonfinancialâare subject to oversight by the Federal Trade Commission (FTC), which regulates firms for competition and fairness. Consumer Financial Protection Bureau The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203 ) established the CFPB to implement and enforce federal consumer financial law while ensuring that markets for consumer financial services and products are fair, transparent, and competitive. Dodd-Frank consolidated the consumer protection authorities promulgated by other agencies and provided CFPB new powers to issue rules declaring certain acts or practices associated with consumer financial products and services to be unlawful because they are unfair, deceptive, or abusive. The CFPB generally has regulatory authority over providers of an array of consumer financial products and services, including deposit taking, mortgages, credit cards and other extensions of credit, loan servicing, collection of consumer reporting data, and debt collection associated with consumer financial products. The scope of its supervisory and enforcement authority varies depending on an institution's size and whether it holds a bank charter. Federal Trade Commission Congress passed the Federal Trade Commission Act in 1914 to create the FTC and give it legal authority to protect consumers and promote competition. Specifically, the FTC looks to prevent unfair or deceptive acts or practices and to seek monetary redress or other relief for conduct deemed injurious to consumers. Generally, the FTC has broad investigation, rulemaking, and enforcement authorities that enable it to accomplish its mission. Securities Regulators Many companies issue stocks and bonds, trade derivatives, and offer other products collectively called securities. Securities are generally regulated by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). (The CFTC has specific responsibility for derivatives markets.) The securities regulators promulgate rules and provide oversight over the institutions in their jurisdiction. They also conduct enforcement actions to investigate and prosecute violations of relevant regulations. Securities and Exchange Commission Congress passed the Securities Exchange Act of 1934 (P.L. 73-291) to establish the SEC and restore confidence in the securities markets after the stock market crash of 1929. The SEC is an independent agency that has broad authority over much of the securities industry in order to protect investors, promote fair and efficient markets, and facilitate capital formation. Commodity Futures Trading Commission The CFTC was created in 1974 by the Commodity Futures Trading Commission Act ( P.L. 93-463 ) to address the expansion of commodities beyond agriculture. Prior to this law, commodities generally were regulated at the Commodity Exchange Authority, a former agency within the U.S. Department of Agriculture. The CFTC regulates the U.S. derivatives markets, including futures, options, and swaps, and implements the Commodity Exchange Act (CEA; P.L. 74-675). Similar to the SEC, the CFTC has rulemaking and enforcement authorities for a range of issues, but the CFTC's authorities focus on derivatives markets derived from the CEA. Appendix B. Financial Innovation Offices Appendix C. Select Regulatory Fintech Initiatives Federal Reserve System Innovation Programs OCC Responsible Innovation Framework The OCC's Office of Innovation implements its Responsible Innovation framework in a number of ways that are described and summarized in Table C-1 . For instance, the agency established an outreach and technical assistance program to establish a dialogue with banks, fintech companies, consumer groups, trade associations, and regulators. It engages in outreach through a variety of channels. Over the past two years, for example, the Office of Innovation hosted office hours in five different cities for over 125 stakeholders, approximately 250 additional meetings and calls with stakeholders, and over 100 conferences and other events. The office provides technical assistance to help banks and fintech companies understand OCC expectations, relevant laws, regulations, and guidance, such as the agency's third-party risk management guidance. The Office of Innovation also conducts research and develops content, including white papers, webinars, and collaborations with other OCC business units to deliver in-house training, including on payment technologies. The Office of Innovation convenes representatives from various OCC business units to develop a coordinated strategy on particular topics, and it forms working groups to consider particular issues to coordinate and facilitate discussion between stakeholders and the OCC. It also endeavors to reduce regulatory uncertainty and inconsistency, provides assistance to agencies interested in establishing innovation offices, and helps the OCC share information and communicate with other U.S. agencies on emerging trends and ways to improve its innovation initiatives. The OCC participates in various regulatory forums, such as the Financial Stability Board's Financial Innovation Network, and it serves as co-chair of the Task Force on Financial Technology, established by the Basel Committee on Banking Supervision (BCBS). Furthermore, the OCC collaborates on cybersecurity issues domestically and internationally through the Federal Financial Institutions Examination Council, the Financial and Banking Information Infrastructure Committee, and the BCBS. Consumer Financial Protection Bureau Financial Innovation Programs The CFPB's recent efforts pertaining directly to fintech are summarized in Table C-2 below. Financial Crimes Enforcement Network The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury charged with administering U.S. anti-money laundering (AML) and combating the financing of terrorism (CFT) laws, most notably the Bank Secrecy Act (BSA; P.L. 91-508). In 2018, FinCEN, along with the Federal Reserve, the FDIC, the NCUA, and the OCC, announced an effort to encourage banks and credit unions to take innovative approaches to combating money laundering, terrorist financing, and other illicit financial threats by enhancing the effectiveness and efficiency of BSA/AML compliance programs. FinCEN Innovation Initiative. FinCEN launched an Innovation Initiative to address the challenges and opportunities of BSA and AML-related innovation in the financial services sector. FinCEN's Innovation Initiative includes the FinCEN Innovation Hours Program and regulatory relief programs to facilitate innovation around AML/CFT compliance. Additionally, FinCEN suggested that it will consider incorporating testing programs, similar to sandboxes, and "Tech Sprints" to facilitate the development of innovative solutions to AML/CFT challenges. Innovation Hours Program. The Innovation Hours Program is the most recent addition to the FinCEN Innovation Initiative. FinCEN intends to host financial institutions, technology providers, and other firms involved in financial services to discuss their interests in innovation around AML/CFT compliance. Appendix D. Payments Regulation and Programs Consumers generally have shifted toward electronic payments such as debit and credit cards. Since 2001, the Federal Reserve has been studying consumer trends in payment activities on a triennial basis. In 2019, the CFPB issued a rule to grant protections to prepaid cards in a similar fashion to debit and credit cardsâthis reflects the shift in consumer preference toward electronic payments. However, regulatory actions around electronic payments may create adverse conditions for some consumers who rely on cash. Balancing the interests of a faster, efficient payment system with one that works for different types of consumers is a challenge currently facing the Federal Reserve and CFPB. Table B-1 shows a number of these rules, which can impact fintech companies that offer services or support payments operations through partnerships at banks. As the Federal Reserve contemplates the design of its proposed faster payments system, it has numerous long-standing payments groups working on fintech and related issues. Many of these groups focus on the payments market. An overview of the Federal Reserve's payments groups is provided in Table B-2 to show the scope of work of the agency and its Reserve Banks. Appendix E. CRS Fintech Products Cybersecurity CRS Report R44429, Financial Services and Cybersecurity: The Federal Role , by M. Maureen Murphy and Andrew P. Scott CRS Report R45631, Data Protection Law: An Overview , by Stephen P. Mulligan, Wilson C. Freeman, and Chris D. Linebaugh. CRS In Focus IF10559, Cybersecurity: An Introduction , by Chris Jaikaran. Lending CRS Report R44614, Marketplace Lending: Fintech in Consumer and Small-Business Lending , by David W. Perkins. CRS Report R45726, Federal Preemption in the Dual Banking System: An Overview and Issues for the 116th Congress , by Jay B. Sykes. Payments CRS Report R45927, U.S. Payment System Policy Issues: Faster Payments and Innovation , by Cheryl R. Cooper, Marc Labonte, and David W. Perkins. CRS Report R45716, The Potential Decline of Cash Usage and Related Implications , by David W. Perkins. Banks and Third-Party Vendor Relationships CRS In Focus IF10935, Technology Service Providers for Banks , by Darryl E. Getter. Cryptocurrency and Blockchain-Based Payment Systems CRS Report R45427, Cryptocurrency: The Economics of Money and Selected Policy Issues , by David W. Perkins. CRS Report R45116, Blockchain: Background and Policy Issues , by Chris Jaikaran. CRS Report R45664, Virtual Currencies and Money Laundering: Legal Background, Enforcement Actions, and Legislative Proposals , by Jay B. Sykes and Nicole Vanatko. CRS In Focus IF10824, Financial Innovation: "Cryptocurrencies" , by David W. Perkins. Digital Assets and Capital Formation CRS Report R46208, Digital Assets and SEC Regulation , by Eva Su. CRS Report R45221, Capital Markets, Securities Offerings, and Related Policy Issues , by Eva Su. CRS Report R45301, Securities Regulation and Initial Coin Offerings: A Legal Primer , by Jay B. Sykes. CRS In Focus IF11004, Financial Innovation: Digital Assets and Initial Coin Offerings , by Eva Su. High-Frequency Securities and Derivatives Trading CRS Report R44443, High Frequency Trading: Overview of Recent Developments , by Rena S. Miller and Gary Shorter. CRS Report R43608, High-Frequency Trading: Background, Concerns, and Regulatory Developments , by Gary Shorter and Rena S. Miller. Regulatory Approaches and Issues for Congress CRS In Focus IF11195, Financial Innovation: Reducing Fintech Regulatory Uncertainty , by David W. Perkins, Cheryl R. Cooper, and Eva Su. CRS Report R46332, Fintech: Overview of Innovative Financial Technology and Selected Policy Issues , coordinated by David W. Perkins.