Initial Reactions to Multistate Compact on MSB Licensing
On the heels of news that seven states agreed to a multi-state compact that will significantly streamline the licensing process for fintechs and other money services businesses, reporters and financial services experts sounded off on the compact.
“This is something that we can do to create licensing efficiencies with these companies, hopefully help get them off the ground and it doesn’t sacrifice consumer protection,” Charlie Clark, agency deputy director and director of consumer services at the Washington Department of Financial Institutions, said in an interview...
Creating a more uniform licensing process is a part of a larger strategy launched last May called Vision 2020 in which the state regulators are trying to streamline state regulation to help fintech firms and other nonbank money-services businesses, called MSBs.
“This 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, the president and CEO of the bank supervisor group, said in a press release.
The pilot program could also help make a state license more attractive to fintech firms that are debating whether to do business by state or wait for a federal regulator to create a national charter.
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.
The initiative responds to longstanding complaints by fintech startups about the costly and time consuming process of having to secure licenses separately in each state in order to operate in the United States.
A change in licensing requirements would be “positive,” [Marketplace Lenders Association Executive Director Nat] Hoopes said, “but we’re hoping that they would push beyond it to look at ways that would harmonize state law.”
As technology in the financial services arena has advanced, state regulators have heard concerns from innovative start-ups providing money services about the difficulties of varying licensing requirements in multiple states and challenges about having their full application reviewed separately by each individual state before they can offer services nationwide.
Commissioner Greg Gonzales said: "With this initiative, state governments will be able to be responsive to business innovation while ensuring regulatory compliance."
This announcement from state regulators makes for an interest counter-point to the SEC and CFTC chairs' interest in a federal-level money transmitter regime for cryto exchanges.