By Lydia Beyoud
Seven states are banding together to harmonize parts of their money transmitter licensing procedures, a move that could give new fintech companies and cryptocurrency exchanges a leg up in expanding their business.
Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington have agreed to streamline the initial phase for fintech applicants to obtain a money transmitter license, the Conference of State Bank Supervisors announced today. The group represents state-level financial regulators.
It takes one to two years and hundreds of thousands to millions of dollars in application fees and bonding requirements, not including capital requirements, to become licensed in all 50 states.
The program is partly a response to federal regulators’ interest in pre-empting state-level regulation of fintechs, such as the Office of the Comptroller of the Currency’s proposed special bank charter for fintech companies.
Under the new agreement, the partner states will accept the findings of any other state in the group that approves key elements of state licensing for a money transmitter. Those include a company’s business plan, cybersecurity, information technology, background check, and compliance with federal Bank Secrecy Act laws. That means companies applying for licenses within the group of states would only have to explain the details of their business plans to one state, rather than seven.
Some other aspects of the licensing process would still need to be conducted on a state-by-state basis.
The money service business (MSB) licensing agreement “will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broad participation by other states across the country,” John Ryan, CSBS president and CEO, said in a statement.
The move is the first step toward a goal of including all 50 states, and more are expected to join the program soon, Catherine Pickels, a spokeswoman for the CSBS, told Bloomberg Law. The effort is part of CSBS’s broader “Money 2020” initiative, which aims to harmonize fintech licensing and supervision nationwide.
The CSBS filed suit in 2017 against the Office of the Comptroller of the Currency’s authority to create such a special bank charter for fintechs. Both parties — and prospective fintech applicants — are still awaiting a decision on CSBS’s challenge in the U.S. District Court for the District of Columbia. A judge in New York dismissed that state’s challenge to the charter Dec. 12, 2017.
The states’ agreement is likely to be welcome news to critics of the current system, who say the patchwork of state licensing statutes hampers growth in the fintech market.
State-by-state money transmitter regulations generate “uncertainty for innovative financial services businesses whose novel products and technologies straddle the statutory definitions of money transmission,” Peter Van Valkenburgh, research director for Coin Center, a Washington-based nonprofit focused on cryptocurrency and technology policies, said in a January report on money transmission services.
To contact the reporter on this story: Lydia Beyoud in Washington at email@example.com
To contact the editor responsible for this story: Michael Ferullo at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)