Last week, the Conference of State Bank Supervisors (CSBS), the nationwide organization of financial regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands, released a series of action items to implement recommendations received from the CSBS Fintech Industry Advisory Panel. The panel was established in 2017 to help streamline multistate regulation of FinTech businesses and other nonbanks, and comprises thirty-three companies, including FinTech firms like SoFi, Ripple, and Circle. The panel also contains two subgroups: one focused on the lending industry; and the other focused on the payments industry.
CSBS endorsed fourteen panel recommendations, primarily with respect to creating uniform legal definitions and practices, increasing regulatory transparency, and expanding the use of common technology among state regulators. CSBS highlighted several next steps it plans to take to implement these recommendations, such as creating an online database of state licensing and FinTech guidance, piloting the new State Examination System technology offering to simplify examinations of nonbanks operating in multiple states, and expanding the use of the Nationwide Multistate Licensing System among all state regulators and to all nonbank industries supervised at the state level. In terms of the lending industry specifically, CSBS also plans to create a standardized call report for consumer finance businesses, while in terms of the payments industry, CSBS seeks to develop a fifty-state model law to license money services businesses.
As the lending and payments subgroup reports indicate, the United States’ patchwork of state-level laws and regulations related to financial services is often daunting for FinTech firms and other nonbanks to navigate. In that sense, CSBS’s endorsement of these recommendations is a welcome step towards greater uniformity and harmony among state-specific requirements. Yet it is only a first step. For example, the recommendations do not directly address state-specific cryptocurrency considerations, which at times bedevil payments businesses that utilize digital assets. It also remains to be seen to what extent particular recommendations are actually implemented by individual states. Nevertheless, this remains a promising development, and it will be interesting to see how these recommendations impact the current collage of state laws and regulations in this area.
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