The Trump Administration’s May 19 executive order[1] on fintech innovation (the “Order”) seeks to force a sharp shift in the regulatory relationship between banks and other federally regulated financial services providers and what it calls “fintech”—any financial service offered or supported through “technological means” (as if all financial services aren’t delivered that way—there might be a pawn shop somewhere still using paper tickets.)
The Order states that it is “the policy of the United States to streamline regulatory processes, reduce unnecessary barriers to entry, and encourage collaboration between fintech firms, federally regulated financial institutions, and Federal financial regulators.” That’s an anodyne but unexceptional goal, although there may be more going on here than meets the eye.
For those following the power game between the White House and Federal Reserve Board (the “Fed”), a closer look reveals a clever piece of legal and policy legerdemain that allows the Trump Administration to pay lip service to a broad concept of Fed independence while actively undermining it. As a result, the Order puts the Fed in a difficult position early in the tenure of Chair Kevin Warsh.[2]
The Order defines fintech broadly. While the definition includes what we usually think of as fintech—things like “neobanks,” which offer digital banking services without physical locations, and other nonbank providers of traditional financial products—it’s hard not to conclude that the Order’s real focus is purveyors of the administration’s (and the Trump family’s) favorite “innovative,” gambling-based activities: crypto trading and prediction markets. It also seeks to promote blockchain solutions of all types.
The scope of the Order is as broad as it could possibly be:
“Fintech firm” refers to a non-bank company that uses or develops technological means to offer or support the offering of financial products or services, including, but not limited to, any application or any digital or online technology that facilitates access to, management of, or data processing for financial products or services. Such financial products or services may include, but are not limited to, payment processing, lending, deposit-taking, derivatives, investment management, brokerage services, underwriting and capital-market activities, custodial and fiduciary services, digital banking, digital asset-related services, securities and commodities market activities, and blockchain-based services. For the avoidance of doubt, such financial products or services also include the activities set forth in paragraphs (A) through (G) of section 4(k)(4) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)(4)).
The last sentence incorporates all activities deemed “financial in nature” that are permissible to financial holding companies.[3]
The Order requires the heads of the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the National Credit Union Administration, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency—but not the Fed—to do a variety of things:
conduct a review of existing regulations, guidance, supervisory practices, and application processes to identify those that could be updated to facilitate innovation, and competition to financial products and services for fintech firms, particularly those that are small and emerging. The reviews shall identify regulations, guidance documents, orders, no-action letters, and other items that unduly impede fintech firms from entering into partnerships with federally regulated institutions (including insured depository institutions, credit unions, broker-dealers, investment advisers, and futures commission merchants), as well as regulations, guidance documents, orders, no-action letters, and other items that could be amended to streamline application processes for eligible fintech firms seeking bank charters, credit union charters, deposit or share insurance, and other Federal licenses, registrations, and authorizations, balancing innovation interests with the importance of safety and soundness, consumer and investor protection, market integrity, financial stability, and oversight.
Within 180 days, the named federal financial regulators are required, in consultation with Kevin Hassett, the assistant to the president for economic policy, to “take steps” to encourage innovation as a result of the review.
But the most interesting part for Fed watchers is this: Section 4(a) of the Order also contains a “request” for the Fed to comply with all the “fintech”-related bank regulation requirements that are applied directly to the other federal banking agencies as mandates in the Order. [4]
On its face, the phrasing in that part of the Order can be viewed as a massive victory for the concept of Fed independence. By using this “request” framing, the Trump Administration formally acknowledges for the first time that the “independence” of the Fed extends beyond monetary policy and includes its supervision of state-chartered Fed member banks, bank holding companies, financial holding companies and foreign banking organizations.[5]
This is a significant retreat by the administration from the aggressive approach taken in the president’s February 2025 executive order on independent regulatory agencies, which asserted that the Fed was independent from Executive Branch control only when it came to the FOMC and monetary policy and not when it came to bank regulation. [6]
Stepping back for a moment: Although the idea of Fed “independence” has been well established in policy circles, its legal justification is complex and has been heavily contested by the Trump White House since the Supreme Court began to adopt the so-called unitary executive theory and eliminate protections for independent regulatory agencies in recent years. The Fed does many things in addition to controlling the money supply and influencing interest rates—things like regulating banks and holding companies and running the national payments system. Some argue that “independence” should not apply to these non-monetary policy matters. While the better argument is probably that the Fed’s bank regulatory and payments activities are part of its control over monetary policy and thus should be independent,[7] the issue isn’t settled.
The change in the administration’s formal attitude to Fed independence can in part be attributed to pragmatism. Two things have changed since the 2025 executive order. First, the Supreme Court strongly indicated during oral arguments in the case challenging the firing of Fed board governor Lisa Cook that the Court will exempt the Fed from direct presidential control under an exception to its unitary executive theory. Second, the pushback from Wall Street leadership, the financial press, and congressional leaders against any efforts to reduce Fed independence has been nearly universal.
So, has the administration given up on trying to bend the Fed to its will? Legally, perhaps, but not as a matter of power politics.
There are many ways to use legalisms to skin a cat, as this administration knows well. And, as we all know, some requests are really demands. This is one of those “requests.”
The president is throwing down a politely-phrased gauntlet to new Fed leadership, daring them not to comply with a bank regulatory-policy diktat while offering them a face-saving way to maintain the aura of independence without the reality.
This puts Chair Warsh in a particularly difficult situation personally. He is newly confirmed for the job after facing congressional skepticism about his ability to stand up to political pressure from the president. If he leads the Fed to comply with the request/demand, he may be accused of “secret deals” in areas where the president is ethically and financially compromised and of political subservience to the Trump agenda. If the Fed fails to comply, he will be attacked aggressively for that failure by the administration because, after all, the president asked nicely.
Warsh’s situation is complicated by the fact that he has openly opined[8] that the Fed is not independent of Executive Branch control in bank regulatory matters. So what’s a new chair to do?
Given his history, and despite the criticism that may follow, Warsh will almost certainly take the bait and push the Fed to do what the president asks by adopting fintech-friendly bank regulatory policies in line with those of the other banking agencies, regardless of what the views of the career regulators at the Fed might be. And the administration appears confident that Michelle Bowman and Christopher Waller, Trump appointees to the Federal Reserve Board of Governors, will agree and that the Fed as a whole will support the president’s personal and policy priorities.
The irony is this. Despite badly losing both the legal and public opinion battles on Fed independence in bank regulatory matters, the administration appears to have won the war, leaving the Fed with a future of Potemkin independence in bank regulatory matters, where it will comply with any policy directive from the president as long as it is phrased as a “request “rather than an order.
ENDNOTES
[1] https://www.whitehouse.gov/presidential-actions/2026/05/integrating-financial-technology-innovation-into-regulatory-frameworks/
[2] While there have historically been good reasons for the Fed to coordinate bank regulatory policy with the other “independent” regulatory agencies, those reasons became more questionable after Supreme Court decisions eliminating the concept of an independent agency and making agencies like the OCC and FDIC effectively subject to presidential political and policy fiat.https://www.scotusblog.com/2025/12/morrison-v-olson-and-the-triumph-of-the-unitary-executive-theory/
[3] For purposes of this subsection, the following activities shall be considered to be financial in nature:
(A) Lending, exchanging, transferring, investing for others, or safeguarding money or securities.
(B) Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State.
(C) Providing financial, investment, or economic advisory services, including advising an investment company (as defined in section 3 of the Investment Company Act of 1940 [15 U.S.C. 80a–3]).
(D) Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly.
(E) Underwriting, dealing in, or making a market in securities.
(F) Engaging in any activity that the Board has determined, by order or regulation that is in effect on November 12, 1999, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto (subject to the same terms and conditions contained in such order or regulation, unless modified by the Board).
(G) Engaging, in the United States, in any activity that—
(i) a bank holding company may engage in outside of the United States; and
(ii) the Board has determined, under regulations prescribed or interpretations issued pursuant to subsection (c)(13) (as in effect on the day before November 12, 1999) to be usual in connection with the transaction of banking or other financial operations abroad.
[4] The Order contains a separate, but similarly phrased, “request” directed at the Board with regard to expanded nonbank access to the U.S. payments system, but the Fed’s proposal for so-called “Skinny” master accounts proposed on the next day appears to have rendered that issue moot for now. https://www.federalreserve.gov/newsevents/pressreleases/other20260520a.htm
[5] And the acceptance of independence extends to the aforementioned payments matters as well.
[6] “This order shall not apply to the Board of Governors of the Federal Reserve System or to the Federal Open Market Committee in its conduct of monetary policy. This order shall apply to the Board of Governors of the Federal Reserve System only in connection with its conduct and authorities directly related to its supervision and regulation of financial institutions.” https://www.whitehouse.gov/presidential-actions/2025/02/ensuring-accountability-for-all-agencies/
[7] Lev Menand, The Supreme Court’s Fed Carveout: An Initial Assessment, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5266613; Daniel K. Tarullo, The Federal Reserve and the Constitution, 97 S. Cal. L. Rev. 1 (2024).
[8] https://www.federalreserve.gov/newsevents/speech/warsh20100326a.htm.
Todd H. Baker is a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia Business School and Columbia Law School.