Washington, D.C. – David Cotney, Massachusetts Division of Banks Commissioner and Vice Chairman of CSBS, told U.S. Senators during a hearing on virtual currency today that state financial regulators have an established structure for the regulation and oversight of money transmitters and other money services businesses that offers an existing regulatory framework to supervise emerging payment technologies and alternative currencies.
In testimony before the Subcommittee on National Security and International Trade and Finance, and the Economic Policy Subcommittee of the U.S. Senate Banking Committee, Cotney said state regulators have long supervised money transmitters to protect consumers and preserve national security and law enforcement interests. As technology has evolved to include mobile payments and digital commerce, he said state agencies are exploring the connection between existing money transmitter regulation and virtual currencies.
“To understand the opportunities and the risks presented with these evolving payment technologies, state regulators are monitoring new entrants into the digital market and they are actively engaged in discussions with industry, federal regulators and key stakeholders to determine the appropriate level of oversight and supervision for virtual currencies,” Cotney said. “Emerging payment technologies and alternative currencies are at their core about the electronic movement of other people’s money. As such, state regulators view our responsibility as supervising in a manner that protects consumers and mitigates risks while not impeding industry innovation and flexibility.”
State agencies are working to expand upon an already existing and coordinated structure for the regulation and oversight of money transmitters and other money services businesses through the Nationwide Multi-State Licensing System (NMLS). NMLS has become an integral part of state supervision for a variety of non-bank financial services providers and has helped to promote trust, confidence and regulatory collaboration.
“The states stand ready to work with our federal counterparts, as well as with representatives from industry and consumer groups, to seek opportunities for greater clarity and consistency and to allow for innovation in the payments systems,” said Cotney. “We must work to both exploit the benefits and minimize the risks of such innovations.”
Cotney’s written testimony is available here.
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The Conference of State Bank Supervisors (CSBS) is the nationwide organization of banking regulators from all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. State banking regulators supervise 5,230 state‐chartered financial institutions. Further, most state banking departments also regulate a variety of non-bank financial services providers, including mortgage providers. For more than a century, CSBS has given state supervisors a national forum to coordinate supervision of their regulated entities and to develop regulatory policy. CSBS also provides training to state banking and financial regulators and represents its members before Congress and the federal financial regulatory agencies.