U.S. financial regulations underwent significant changes. The CFPB was anticipated to cease actions against "rent-a-bank" partnerships, allowing fintech companies to bypass state interest rate caps.
On January 24, 2025, the SEC introduced SAB 122, replacing the previous rule, SAB 121. Initially implemented in 2022, SAB 121 required banks to classify crypto assets held for customers as liabilities, thereby increasing the cost of holding crypto.
Policy Shifts and Regulatory Landscape
- Executive Order on Digital Assets: President Trump signed an executive order on January 23, 2025, to bolster U.S. leadership in digital financial technology, emphasizing crypto innovation and positioning the country as a global hub for blockchain and digital assets.
- Regulatory Softening: Agencies like the Consumer Financial Protection Bureau (CFPB) are expected to adopt a lighter touch, reversing Biden-era scrutiny of bank-fintech partnerships and crypto integration. The abrupt halting of CFPB operations by Trump’s Department of Government Efficiency (DOGE) has created regulatory uncertainty, with concerns about fragmented state oversight replacing federal supervision.
- Crypto-Friendly Stance: The administration aims to relax restrictions on banks engaging with public blockchains (e.g., Bitcoin, Ethereum), potentially replacing bans with tailored risk-management rules.
Corporate and Industry Moves
- Lobbying Surge: Major fintech firms and trade groups have ramped up Capitol Hill engagement post-election, seeking to shape policies on AI, third-party partnerships, and decentralized finance.
- Trump Media’s Fintech Expansion: Trump Media & Technology Group announced Truth.Fi, a fintech platform custodied by Charles Schwab, with plans to launch six “America First” investment funds (including a Bitcoin ETF) targeting sectors like manufacturing and energy. The venture has drawn scrutiny over potential conflicts of interest, given Trump’s majority stake in the company.
Challenges and Criticism
- Debanking Concerns: Trump has accused traditional banks like Bank of America and JPMorgan of political bias against conservatives, though executives deny such practices.
- Regulatory Vacuum: The dismantling of the CFPB has left consumer finance oversight in limbo, with industry leaders like Jamie Dimon acknowledging the risks of inconsistent state-level regulation.
Regulatory Pressure Points for Commercial Lenders
AML/CFT Expansion
New FinCEN proposals (finalized in 2025) require lenders to incorporate AML priorities into risk assessments, including monitoring for crypto-collateralized loans or DeFi integrations. This applies even to non-bank commercial lenders if they engage in cross-border transactions or handle digital assets.
Small Business Lending Rule (Section 1071)
Despite Trump’s “10-to-1” deregulation mandate, the CFPB’s small business data collection requirement remains active for lenders with ≥2,500 originations.
Compliance deadlines start July 2025, requiring reporting on race, gender, and loan pricing—a potential burden for alternative lenders using automated underwriting.
Fair Credit Reporting Act (FCRA) Expansion
Proposed rules targeting “data brokers” could impact alternative lenders relying on non-traditional credit data (e.g., cash flow analytics, supplier invoices).
DeFi/Crypto Spillover Risks
Stablecoin Scrutiny
While Trump’s executive order promotes USD-backed stablecoins, the SEC’s Crypto Task Force may impose custody rules affecting platforms offering crypto-collateralized business loans.
Banking-as-a-Service (BaaS) Oversight
Federal agencies are scrutinizing bank-fintech partnerships more closely post-2024 failures. Alternative lenders relying on partner banks for charter access could face stricter due diligence requirements.
Commercial Real Estate (CRE) Focus
Regulators now demand loan-level stress testing for CRE portfolios, which may trickle down to alt lenders in sectors like hospitality or retail.
Strategic Mitigation for Alt Lenders
- RegTech Adoption: Implement AI-driven tools for AML monitoring and Section 1071 compliance to reduce manual workloads.
- Hybrid Models: Balance blockchain efficiency (e.g., smart contracts for syndicated loans) with traditional underwriting to avoid DeFi-specific regulatory traps.
- State-Level Advocacy: With federal oversight receding, engage with pro-fintech states (e.g., Wyoming, Florida) shaping commercial lending rules.
- Collateral Flexibility: Avoid overexposure to crypto collateral—only 12% of small businesses accept crypto payments, making traditional asset-backed loans safer amid volatility.
Key Opportunities
- AI-Powered Dynamic Lending: Leverage machine learning to offer adjustable repayment terms based on real-time cash flow data—explicitly exempt from Biden-era BNPL rules if structured as commercial (not consumer) credit.
- SBA Partnership Growth: New SBA rules simplifying refinancing and encouraging fintech participation create openings for alt lenders in underserved markets.
While commercial lending avoids the brunt of consumer-focused DeFi crackdowns, proactive compliance with AML, data privacy, and partnership rules will be critical. The 2025 trend favors lenders blending automation with localized human oversight to navigate fragmented regulations.
Marketplace Lending Regulations
Deregulation of Bank-Fintech Partnerships
- The FDIC’s 2020 brokered deposits rule, which enabled fintechs to partner with banks for deposit services, may remain intact under Trump-appointed regulators. Proposed Biden-era rollbacks (e.g., stricter oversight of banking-as-a-service models) are likely to be shelved, fostering growth in embedded finance products.
- Federal banking agencies may reduce enforcement actions against banks collaborating with fintechs, reversing Biden-era consent orders targeting risk management failures.
Crypto and DeFi Integration
- Trump’s Executive Order on Digital Assets (January 2025) prioritizes blockchain innovation and stablecoin adoption while banning central bank digital currencies (CBDCs). This could spur crypto-backed lending platforms and decentralized finance (DeFi) products, though regulatory clarity for crypto lending remains limited.
Risks and Challenges
Consumer Protection Gaps: Reduced federal oversight could expose borrowers to predatory lending practices, particularly in states without robust usury laws.
Market Volatility: Deregulation may encourage riskier lending models, such as income-share agreements or crypto-collateralized loans, without adequate safeguards.
Our Opinion
Alternative lenders who can rapidly build state-by-state compliance frameworks while maintaining flexible funding sources will dominate the 2025 landscape.
The CFPB's operational halt creates a unique window for product innovation, but smart lenders should maintain compliance standards as if strict federal oversight could return any moment.
The real winners will be those who invest heavily in data analytics and automated compliance tools while building multiple banking partnerships, rather than relying on a single BaaS provider or chasing high-yield but risky lending products.
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