Digital Assets: State Regulators Roll Out Multi-State Compliance For Crypto and FinTech Firms

September 17, 2020 | Digital Assets, FinTech, News, Regulations
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One-company, one exam.

Nationwide payments firms now have to undergo a single comprehensive exam to effectively satisfy all states’ regulatory compliance requirements. The Conference of State Bank Supervisors (CSBS) announced Tuesday its “MSB Networked Supervision” initiative in this regard, effective 2021.

“The initiative will apply to 78 of the nation’s largest payments and cryptocurrency companies that combined move more than $1 trillion a year in customer funds,” the CSBS said in a statement.

The CSBS is the national organization of bank regulators from all 50 states, American Samoa, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. It was originally organized in 1902 as the National Association of Supervisors of State Banks.

The move comes amidst a continuing controversy between state and federal banking regulators (OCC) over the oversight and licensing of payments and crypto companies. (American Banker)

MSB Networked Supervision – How it works

“The single exam will be led by one state overseeing a group of examiners sourced from across the country,” the CSBS said. “By relying on experts across the state system — including in cybersecurity and anti-money laundering — regulators will gain more insight while also freeing up state resources.”

Nationwide payment companies and crypto firms will now see a drastic reduction in their compliance load as they will undergo a single exam instead of dozens of individual state exams.

“One company, one exam is a significant and important shift in how state regulators will ensure compliance with consumer protection and safety and soundness standards for the largest payments companies,” said Kevin Hagler, Georgia Department of Banking and Finance commissioner and CSBS Board chair. “By working together and relying on the excellent work of fellow state regulators, we will be able to do even more.”

Rosemary Gallagher, Western Union associate general counsel, welcomed the initiative. She said it would drive harmonization and streamline supervision across the board.

Meanwhile, the MSB initiative from CSBS received only qualified support from acting Comptroller of the Currency Brian Brooks.

“While the efforts alleviate some of the inherent challenges facing a system based on 50 state laws and licensing regimes, only federal law and the uniform regulatory framework it provides fully addresses these issues,” he said.

Related Story:     Banks and FSAs Cleared as Crypto Assets Custodians

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