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Protocol | Fintech

California wants to regulate crypto. Meet the woman in charge.

Christina Tetreault could help shape the conversation around bitcoin and other cryptocurrencies in the state where Coinbase, Square and Visa were born.

​Christina Tetreault

Christina Tetreault is the first head of the brand new California Office of Financial Technology and Innovation.

Photo: California Department of Financial Protection and Innovation, Protocol

California, home to PayPal, Stripe, Square, Robinhood and Coinbase, just sent a clear signal that it's taking its role as a major fintech hub more seriously.

The state has set up a new Office of Financial Technology and Innovation, which will essentially be the main government body focused on all things fintech. In May, California named consumer fintech lawyer Christina Tetreault, a veteran of the nonprofit Consumer Reports, to lead the new agency.

It's a major shift for California, which for years has punted on the question of how its banking and money transmission laws applied — if at all — to cryptocurrencies.

The OFTI emerged from a recent shakeup in California's bureaucracy based on the state's new Consumer Financial Protection Law. The changes included renaming the Department of Business Oversight as the Department of Financial Protection and Innovation and the creation of a Consumer Financial Protection Division.

Fintech is not new, of course, least of all in California, where arguably the first fintech startup, Visa, got its start in 1958. But the industry has exploded in ways that are shaking up financial services in California and beyond.

Startups in the Golden State have come up with new tools for payments, lending, banking and other financial needs. Then there's the trend at the heart of the most serious disruption in the financial services industry, one which the OFTI is tasked with monitoring closely: bitcoin and crypto.

Given California's history of helping shape federal regulation, how the state approaches fintech and crypto could force the conversation in Washington around consumer protection and market stability.

The OFTI is not a regulatory body, but it will play a critical role in defining new rules for fintech, including cryptocurrencies. The agency's role is essentially to talk to companies creating new technologies for managing money, as well as critics raising red flags about how these new tools might harm consumers and society. The agency has already received 128 crypto-related complaints this year, it said.

That's where Tetreault comes in.

A former financial policy manager at Consumer Reports, she was chosen to lead the California body, which aims to provide a "national model for fostering responsible innovation" in fintech, the DFPI said in a statement.

In her first media interview since taking the reins at the OFTI in May, Tetreault, who is assuming a government post for the first time in her career, discussed with Protocol why she took the job, her concerns about bitcoin and crypto, and how she sees California navigating the fast-changing world of fintech.

This interview was edited for clarity and brevity.

How did you get the job?

I actually read about the posting. When I looked at all the things that I saw in the posting I was like, "Wow, this takes a couple of skill sets from my career and combines them into one role. And it's a startup environment."

It had the appeal of the subject matter. It had the legacy appeal in terms of the amazing work that the then-[Department of Business Oversight] had done. And then it had this opportunity to really build something, and all three of those things appealed to me a great deal.

But it's government ...

It is government.

How did you process that point about joining a government bureaucracy?

The amazing thing about the [California Consumer Financial Protection Law] is that it has new authority and additional resources. The idea is that we are restoring responsible innovation in California, and supporting its growth, and that solves real problems for people, both innovators and consumers.

I've always been a person who's interested in people and money. When I decided to go to law school, I had this idea that I would work on people and money, and that happened to coincide with the financial crisis which made it even more urgent to work on issues of people and money.

One of the other things that happened around that time was the issuance of the bitcoin white paper.

What was your reaction when you first heard of bitcoin?

When I read the initial white paper, I was fascinated with the idea of returning power to consumers. That was a huge promise of cryptocurrency, the original promise, that you can put power in people's hands. One of the fascinating things about this area is all the huge number of business models and products and services that have come up. We're seeing all this other innovation and products and services built on that.

Why create an office of fintech now?

Fintech has been around for a while, right? This idea of fintech being brand new? No. You also have the legacy of what DBO has done. The organization wasn't waiting for the creation of this office to provide insight and give support. It's just now we have what I think of as almost like an on-ramp. We have a dedicated function for engagement. We have a dedicated function in terms of research. Engagement is about building relationships. The research component is really about what's ahead and trends.

You ask: Why now? California is emerging from the pandemic. But we know that it has changed people's lives in many ways. You see the interest in crypto, for example. You see the rise in contactless payments. You see it in so many areas.

There is also the view that this move, creating a fintech agency, was triggered by the rise of bitcoin and crypto, and the need for regulation. How do you respond to that?

I want to focus on the functions of the office and they're really threefold. Rules and regulations are just one, and our office itself is not doing regulation. We exist within the DFPI, and we work across the organization. We identify resources for licensees or potential licensees. We direct specialized market research. That's about being aware of and understanding trends, impact-flagging opportunities for job growth in California, for supporting responsible innovation. Then there's forecasting risk.

What will be your priority when it comes to crypto?

There's the idea early on that folks who were interested in cryptocurrency, you had to be really sophisticated. It required a sophisticated interest. Now, what we're seeing is this greater and broader societal interest. Against that context, we have the absence of a unified approach. You know there isn't one federal standard. There isn't even one state standard. We've got the very measured approach that California has taken.

Then we've got the reality that the Department of Financial Protection and Innovation has received consumer complaints about cryptocurrency businesses. That's really important to think about as part of the context.

While California has declined to license cryptocurrency businesses under its money transmitter law, things can change. We could adopt new regulations. There could be new interpretive opinions and all that sort of thing.

There's also the consumer side. As I mentioned, the interest [initially] was mostly [from] people with a deep experience and ability to understand the technology. Now with the growth of some of the marketplaces, you have this easier on-ramp. The reality is that in the same way that there isn't this sort of unified approach, there are consumer risks that consumers might not be aware of that we also want to understand.

We're in the process of listening. We welcome engagement from entrepreneurs who want to provide feedback about what California can do to support responsible innovation, to ensure consumer protections in this area. We have an open-door policy. I'm happy to provide you with the email: ofti@dfpi.ca.gov. We welcome the opportunity to engage with folks.

There are complaints that came to the state about the use of crypto. Can you give you examples?

One is: "We can't talk to anyone." There was literally no way to get in touch for consumer issues. That was one bucket.

Cryptocurrencies like bitcoin are decentralized. That makes the marketplaces, companies like Coinbase, the potential target for assigning blame or raising questions.

Let me talk about a real simple fix. If every service provider had a call center … I know people say, "Digital-first, why would we need a call center?" But if, God forbid, you've ever had to try to resolve something by email and a hacker has taken over your email, that becomes an actual impossibility. So I think there's some really low-hanging fruit for ways in which service providers can ensure consumers have a way to resolve issues. And that's I think a good example. You have service providers that are difficult to reach. It gives people real anxiety when it comes to their financial assets, and it's a legitimate concern. I get anxious. I want to know where my stuff is.

Another [complaint] was about losing access to funds.

There have been high-profile cases of people forgetting their passwords and stuff like that.

It could be things like that. But it also was just, for whatever reason, delays or that sort of thing. I'm using this broad bucket of losing access. Then the third bucket was the straight-up fraud, the things that are already illegal in any context and that sort of thing.

Now, even though your office is not a regulatory body, you will play a critical role in terms of providing information and insights that shape regulation?

Absolutely, yes. That's an excellent way of characterizing it. You know, one of the critical needs is the variety of business models. Think about how many business models exist in this area, as well the iterations within a particular organization. They may do custody. They may do lending. They may do all sorts of things. So that's a really important function of this office.

What is your biggest worry about bitcoin and other cryptocurrencies?

You have people who were steeped in technology and who showed an early interest in digital assets. And right now the context is there isn't a uniform framework for consumer protection for digital assets and yet you have the huge growth in it, and an interest in it. My absolute concern is that people will lose all their money and not understand that that was a risk from the start.

California is home to major players in crypto and fintech. Coinbase just went public. PayPal, Square and others are now accepting crypto. What are some of your initial thoughts in terms of how you approach these organizations?

Engagement. We're in that listening mode, and really deep into wanting to hear from entrepreneurs and companies in this space.

What is your vision of what role your office will play in the conversation? There's already a conversation going on, and now you're going to enter that conversation.

I would push back on the word "enter." California has a history here. This actually isn't new. My office is new and I'm new. But California does have a history in this space. I think the strategic opportunities that we have are to facilitate access to beneficial products, improve competition, remove barriers and increase consumer protection.

Can you offer more color on the engagement part of your role?

Keep in mind, you know, I'm in my third week. [Laughs] I am planning listening sessions. I am having listening sessions. I have an open-door policy. Folks who want to contact me: "Great. Let's have a meeting. Let's have a talk."

I'm setting up a formal intake process. I'm getting feedback from entrepreneurs that I have asked many and I welcome it from your readers for how that intake process would look like.

You spent years at Consumer Reports. I'm guessing you have a lot of experience dealing with companies who were not happy with what Consumer Reports said about them. What lessons from that experience will be helpful in this role?

One of the things that really served me well in my previous role was listening engagement. That is an absolutely critical thing that I'm bringing here. My plan is to iterate based on feedback to the extent that people tell me what will work for them in terms of building trust and providing the necessary resources that entrepreneurs need to succeed here in California. The listening component in the dialogue is really critical.

Of course there are also people on the other side, the consumer advocates…

I'm meeting with them too.

California, historically, has set the pace on regulations, especially in tech. How do you see your office playing a role in the national conversation on fintech and crypto?

The OFTI research will help guide DFPI policy considerations. We do work across states and we work in partnership with our federal colleagues and I absolutely see that continuing.

What is your biggest concern?

That no one will come talk to me.

Why is that?

I want folks to know that it's truly an open door. You know that it can be a comfortable thing to have a conversation with a state financial regulator if you have deep pockets. We are very eager to engage even at their earliest stages. I want folks to feel confident and comfortable coming and having those conversations. Then we can provide effective support because if no one knocks on the door, if no one comes in, if no one joins the office hours, I'm going to be very lonely.

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