Blockchain: Removing Politics from Technology

Brian Brooks and the Future of Financial Inclusion

Brian Brooks’ personal history is deeply intertwined with the world of credit, a connection he views positively. Growing up in a Colorado town significantly impacted by a steel factory closure, Brooks learned the value of hard work and financial resourcefulness at a young age.

Early Life and the Importance of Credit

Following the loss of his father when he was 14, Brooks understood that pursuing opportunities – including higher education – would require financial commitment. He secured employment and ultimately financed his college and law school education with over six figures in student loans, carrying an 8% interest rate.

Despite the financial burden, Brooks expresses gratitude for the access to credit. He believes credit is a vital tool, enabling individuals to acquire assets and opportunities they couldn’t otherwise afford.

From Coinbase to the OCC

Brooks’ career trajectory led him to become the chief legal officer of Coinbase, a leading digital currency platform. He recognizes the potential of blockchain and cryptocurrency to expand financial inclusion, a cause central to his values.

In May 2020, Brooks transitioned to the public sector, assuming the role of Acting Comptroller of the Currency at the OCC. His tenure, though brief, was marked by significant legislative efforts concerning bank charters, cryptocurrency, and lending practices. He subsequently returned to the private sector in January.

Joining Spring Labs

In March, Brooks joined Spring Labs as its first independent director, a role that represents a return to the origins of the company. He was among the initial group who conceptualized Spring Labs five years prior.

His objective at Spring Labs is to integrate an innovative mindset with a deep understanding of the traditional banking system, aiming to address its shortcomings. Having overseen the banking system directly, Brooks feels equipped to identify areas for improvement, particularly in secure, anonymous data sharing.

The Need for Innovation and Data Sharing

Brooks observes that many technology companies possess innovative ideas but lack comprehensive knowledge of the systems they aim to improve. His experience within banks and the credit infrastructure provides him with a clear understanding of necessary enhancements.

He emphasizes the importance of secure and anonymous data sharing as a key solution. TechCrunch interviewed Brooks to delve deeper into his return to the private sector, his perspectives on blockchain’s role in financial inclusion, and his belief in separating politics from technological advancement.

Understanding Spring Labs

What Does Spring Labs Do?

Spring Labs leverages blockchain technology to create a more robust network for data sharing, enabling credit bureaus and other entities to assess the creditworthiness of individuals outside the traditional credit system. The open-source nature of blockchain allows for the integration of diverse data sources.

The company’s vision is to eliminate credit exclusion for billions of people by providing data that accurately predicts credit risk, regardless of traditional credit history. The core mission is to expand access to credit for a wider population.

Expanding the Scope of Credit Data

Brooks explains that “richer data” includes factors beyond traditional credit reports, such as on-time rent payments, recurring bank transactions, subscription services, and asset/income information. These elements contribute to a more comprehensive assessment of creditworthiness.

He acknowledges the existence of similar startups but highlights the advantage of blockchain’s decentralized network in gathering a broader range of data compared to centralized data-sharing initiatives focused on specific sources like landlords.

The Power of Agnostic Data

Spring Labs aims to be agnostic regarding data types, focusing on creating a rich data environment where individuals can be assessed based on available information, even without conventional credit indicators. The “secret sauce” lies in refining and assembling this data on the blockchain network.

Accomplishments at the OCC

Key Regulatory Achievements

During his time at the OCC, Brooks spearheaded the enactment of two regulations: the “Valid When Made” rule and the True Lender Rule. These regulations were designed to provide clarity within the financial regulatory landscape.

Additionally, the OCC granted the first charter to a cryptocurrency company, Anchorage, and issued guidance on permissible cryptocurrency activities for banks, contributing to the growth of crypto adoption.

Addressing Risks in Cryptocurrency

Brooks recognizes the challenge of preventing illicit activities, such as terrorism financing and money laundering, within the cryptocurrency space. He explains that the peer-to-peer nature of crypto transactions bypasses traditional banking safeguards like payee verification and currency transaction reports.

Spring Labs offers a solution that allows for the validation of transactions on the blockchain without compromising anonymity. The system can assess the safety of a transaction without revealing the identities of the parties involved, representing a significant breakthrough in fintech.

How Does the System Determine Safety?

The system employs probabilistic judgments based on extensive data analysis. While it may not definitively identify an individual, it can assess their risk profile based on factors like recent purchases or subscription payments. This approach often proves more accurate than relying on government lists, which can contain errors.

The Politicization of Fintech

Distrust of the Banking System

Brooks acknowledges a growing distrust of the banking system, particularly among younger generations, stemming from experiences like the 2008 financial crisis. However, he maintains that the banking system itself is robust and deserving of trust, thanks to ongoing oversight and regulation.

He identifies a core issue: the inherent limitations of traditional banking in serving individuals with non-traditional credit profiles. This gap creates an opportunity for fintech companies to provide alternative financial solutions.

Fintech Filling the Gaps

Brooks believes banks primarily serve the middle 60% of society, leaving a significant segment – including young people, lower-income individuals, minorities, and immigrants – underserved. Fintech companies are incentivized to address these gaps, offering products tailored to those excluded by traditional banking.

He expresses concern over the increasing politicization of fintech, noting bipartisan opposition to innovation. He questions the rationale behind attempts to roll back fintech-friendly policies, arguing that fintech’s primary goal is to serve those overlooked by the conventional financial system.

The Need for a Non-Political Approach

Brooks advocates for removing politics from technology, emphasizing that individuals should not face financial discrimination based on their political beliefs. He believes that societal decisions, such as banning fossil fuels, should be made through democratic processes, not by bank CEOs.

A Personal Connection to Financial Inclusion

Growing Up with Credit

Brooks shares his personal experience growing up in a town devastated by a factory closure and facing the loss of his father. He emphasizes the importance of credit in enabling him to pursue education and opportunities.

He secured a job at 16 and financed his education with substantial student loans, acknowledging the 8% interest rate as a necessary investment. He firmly believes that access to credit is crucial for upward mobility and economic empowerment.

Brooks champions the idea that more credit leads to less poverty, countering the argument that it simply increases debt. He believes fintech companies are well-positioned to expand access to credit for those underserved by traditional banking, fostering a more inclusive financial system.