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OCC calls for federal money transmitter license

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Feb 22, 2024
Michael J. Hsu, Acting Comptroller of the Currency.

Michael Hsu, acting director of the Office of the Comptroller of the Currency. Photographer: Al Drago/Bloomberg via Getty Images

Acting Comptroller of the Currency Michael Hsu on Wednesday called for a federal money transmitter license.

Why it matters: Companies (like X) aiming to move money across the entire U.S. must collect a patchwork of 49 state money transmitter licenses, each with a different level of difficulty.

Hsu called the lack of federal money transmitter licensing standards a "gap" in regulation, opening the country up to potential financial instability.

  • "In payments, I believe the lack of a comprehensive federal money transmitter regime is a regulatory gap that, if filled, could better balance innovation and financial stability," he said in the talk at Vanderbilt University. "A better solution would be for Congress to create a federal framework for payments regulation."

Context: Montana doesn't require a money transmitter license, while New York and California generally have higher bars when approving new players.

  • The Big Apple is said to have toughened the process in recent months, in response to a number of crypto company failures.

Between the lines: Tensions have been rising across the sector — including between the OCC and fintechs, and between some state level and federal level financial authorities. That raises the question of what a federal money transmitter license would look like.

  • Noting that some states have created special charters for fintechs and crypto companies (Wyoming's Special Purpose Depository Institution among them), Hsu rejected the idea of a similar agreement for the OCC.
  • "We will not ... create a special regime or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter," he said.
  • The State of Wyoming notably asked to join Custodia Bank's lawsuit against the Federal Reserve last year, claiming that the Fed undermined the state's banking system in rejecting Custodia's master account bid.

The big picture: Both the OCC and CFPB have grown concerned over fintech services and have sought to regulate the sector under their umbrellas.

  • In the same speech, Hsu suggests the Financial Stability Oversight Council could deem some non-bank financial services activities as systemically risky.
  • That would impose a higher level of scrutiny on the company.
  • Cash managed by a non-bank on behalf of customers could be a potential "trip wire," with companies that segregate their accounts properly less likely to face an assessment than those that have comingled their accounts, he suggested.
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