President Joe Biden's push for regulators to tighten the rules for banks is "well-intentioned but badly focused," says the CEO of one of the world's largest financial advisory, asset management and fintech organisations.
The observation from deVere Group's Nigel Green comes as The White House called for federal banking agencies, in conjunction with the Treasury Department, to implement a raft of reforms on Thursday.
These include raising liquidity requirements for banks, updating liquidity stress tests to consider high-speed digital withdrawals, and requiring banks to submit plans to regulators on how they would close should they fail.
He says: "This is the US government's boldest response yet to the banking crisis that recently led to the collapse of two banks – although it's not definite that the regulators will impose the changes.
"Clearly, and especially after previous waves of deregulation, the tightening of rules must be a good thing.
"A robust regulatory framework is important for protecting depositors and consumers, promoting financial stability, and preventing fraud and illegal activities.
"But, while this move by the Biden administration is well-intentioned, it is also badly focused."
The deVere CEO continues: "At the same time as The White House is pushing for greater regulation for legacy banks, they must also simultaneously focus on digital-only financial institutions. The government can and should do both.
"But currently, there's too much emphasis on traditional banks, which seem to have been in a perpetual game of 'catch-up' in recent years amid evolving customer expectations, regulatory requirements and tech advances, when digital is inevitably the future of banking."
Nigel Green says demographics, tech and mistrust show why digital banking should get more attention from regulators, as it is destined to outrun traditional banking.
"Not only are Millennials and Gen Z the fastest-growing cohort of clients, but they are also becoming the beneficiaries of the Greatest Transfer of Wealth in history.
"According to some estimates, $68 trillion in wealth is to be passed down from the baby boomers – the wealthiest generation ever – to their children and other heirs over the next few decades.
"Also, critically, Millennials and Gen Z have grown up on technology. They are 'digital natives'.
"They've been influenced by the enormous surge in tech as they came into adulthood, and they seemingly became comfortable using fintech [financial technology] to help them access, manage and use their money, rather than using a traditional bank.
He continues: "This wave of tech that bought us not only fintech, but the likes of Uber, Airbnb, and Amazon, also coincided with the financial crash.
"Many people blame the traditional banking industry for causing that crisis and believe that banks prioritise their own profits over their customers' interests, that they lack transparency, fees are too high, customer experience is low, and they have poor standards or corporate responsibility.
"In short, there's huge mistrust in legacy institutions."
This environment has helped fuel the demand for digital-only banks as customers seek out more convenience, accessibility, a better user experience, innovation, and security.
Another major reason why the US government "must focus on digital" is its own move towards a digital dollar.
Nellie Liang, the US Treasury Department's undersecretary for domestic finance, noted recently that the federal government would start meetings in the "coming months" on a Central Bank Digital Currency (CBDC).
"A digital dollar – which, again, seems like an inevitability in our increasingly tech-driven world – would destroy traditional banks. It'll be the final nail in the coffin. Therefore, it seems misguided that the regulatory resources are focused on them," says Nigel Green.
The American Bankers Association has recently argued that the digital dollar would mean "deposits accounting for 71% of bank funding are at risk of moving to the Federal Reserve." This would increase the cost of funding in banking to an "unsustainable" level.
The deVere CEO concludes: "Our world is increasingly being shaped and driven by the blistering pace of tech innovation.
"More and more of us are turning to fintech instead of a traditional banking system that is perceived as outdated, inconvenient, expensive and/or untrustworthy.
"Yet the US government is seemingly focusing its attention and resources on legacy rather than future-focused digital banking. Unless this changes, it will mean that it will forever be playing catch-up with a fast-changing sector."