Next year, could see more enforcement actions – and possibly some new regulations – when it comes to fintech that involves financial advisors.

For instance, Jeffrey Neuburger, an attorney at Proskauer Rose, told ThinkAdvisor that regulators are already “very focused on the fintech area, and it is likely that we will see more regulation in 2018 in this area.”

Similarly,  Gregory Hesse, an attorney at Hunton & Williams, predicts that “certain segments of fintech will have some new regulations” in 2018.

The blockchain, cryptocurrency and robo-advising are among the sectors to watch.

(Related: TD Ameritrade Jumps Out of Gate With Bitcoin)

This year, cryptocurrency, such as Bitcoin, saw skyrocketing prices and some projections predict that will continue into 2018. Those higher prices could lead regulators to increase their scrutiny on the sector.

“The blockchain and cryptocurrency area is one where we expect a number of new developments, though it is very likely that such developments will take the form of enforcement-type actions rather than new regulations,” Anthony Tu-Sekine, an attorney at Seward & Kissel, told ThinkAdvisor.

“Because this area is still fairly new, regulators are wrestling with applying the existing regulatory scheme to these new types of assets,” he said.

He offers the example how the SEC has applied “existing interpretations and regulations to determine whether any cryptoassets, such as cryptocurrency or cryptotokens, are securities.” Similarly, the Commodity Futures Trading Commission “declared years ago that all ‘virtual currencies’ are commodities, and therefore the CFTC claims jurisdictions over certain contracts that involve bitcoin and other cryptocurrencies,” Tu-Sekine said.

In the short term, more compliance policies and procedures are expected, and longer term, regulatory agencies will likely issue rules, Tu-Sekine said. Also, state regulators, such as the New York Department of Financial Services, also may issue regulations.

Furthermore, James Fanto, a professor at Brooklyn Law School, concurred regulators are “no doubt watching blockchain and cryptocurrencies with trepidation out of concern that these technologies are, or might be, used to evade regulations.  For example, cryptocurrencies could constitute an effort to raise capital outside the federal securities laws, and blockchain, among other things, could be used to get around anti-money laundering laws.”

“I think that we will see more enforcement actions in these latter two areas as regulators and their enforcement officials first try to understand the possible threats that users of these products or methods pose,” he said. “Regulations may follow those actions.”

Moreover, Neuberger points out that “regulators seem concerned about cryptocurrencies” and “cryptocurrencies are clearly being used to commit fraud, circumvent sanctions, and other financial crimes that regulators in the financial services area are focused on. Also, there is a concern that the unknowing investor could be hurt in this area, and we expect to see stepped up enforcement to prevent that from happening,” he explained.

“Blockchain as a platform independent of the cryptocurrency applications will be subject to evolving legal developments as well, but more from the perspective of how do we adopt blockchain into current business operations.” 

Robo-advising is another example, where regulators are applying current regulatory perspectives, “whether it is a stand-alone product or is used by an advisor,” Fanto said. 

“I suspect that they will continue this approach towards that aspect of fintech, which is natural because robo-advising is really just a new and efficient way of delivering services to the retail market,” he said.

Meanwhile, a differing view comes from Denver G. Edwards, an attorney at Bressler, Amery & Ross, who said he does “not expect any federal regulations regarding fintech firms in 2018.”

“I do not foresee congressional input on fintech in 2018 because it is not a priority given more pressing issues,” he added. “Regulatory agencies will continue to gather information to understand the risks, challenges, and opportunities for beneficial innovation that fintech companies offer, but I doubt regulators are prepared [to] issue sweeping regulations now.”

“Fintech is in the nascent stages of evolution and regulators are focused on gathering information to get comfortable with a fintech’s proposed products and the controls and risks associated with them,” he explained. “Regulators will generally take time to try to fit a new product/service into the existing scheme before pursuing another course. I think regulators will deal with issues around fintech without specific regulations. They will render narrow decisions to resolve specific issues — particularly around anti-fraud and anti-manipulation — but will avoid making sweeping pronouncements.”

On a related matter, the Office of the Comptroller of the Currency has yet to decide on whether to issue national bank charters to fintech companies, Edwards said.  “It takes time to complete this evaluation process and create a regulatory structure — or find a way to fit the new products/services into an existing regulatory regime — that protects consumers without stifling innovation.”

“There exists a belief among free-market economists that to impose government regulations is to cripple innovation, thwarting entrepreneurial activities,” Howard Yu, a professor at IMD, adds. “It is desirable, and in fact more effective, some might argue, to rely on self-regulation to prevent monopolistic behaviors among industry players.”

— Related: TD Ameritrade Jumps Out of Gate With Bitcoin