Regulations for crypto firms relaxed

Boost for big crypto firms as 48 states streamline regulations

By joining their licensing process, the states have made it far easier for cryptocurrency firms and other fintechs, which until now had to apply for licenses on a state-by-state basis

It’s about to get a lot easier for big payment and cryptocurrency firms to expand across the United States.

The Conference of State Bank Supervisors (CSBS) announced on Sep. 15 that 48 U.S. states have now agreed to follow a single set of rules.

This means that 78 of the country’s biggest fintech companies—including cryptocurrency exchanges like Binance US as well as the likes of PayPal and Western Union—will now only need to undergo one comprehensive exam to unlock access to all of these territories. Companies that are already operating as money transmitters in more than 40 U.S. states automatically become eligible for a single license.

Until now, crypto companies have faced a long, arduous and expensive process as they aimed to achieve compliance. In some cases, this has resulted in extremely patchy coverage. When Binance US launched last September, it was unavailable in 13 states—including New York, Florida, and Texas.

Coincidentally, Binance US announced today that it had received licenses in two more states, Georgia and Alabama.

The new arrangement means examiners from a number of states will be responsible for supervising a business—streamlining a process that fintech firms have long described as unnecessarily cumbersome, and freeing up much-needed resources for state regulators.

Crucially, the CSBS said that this initiative won’t deprive states of the right to launch their own investigation into a company if they so wish.

A ‘significant’ step

According to the CSBS, the 78 companies who are eligible to take part in MSB Networked Supervision collectively move more than $1 trillion a year in customer funds. Kevin Hagler, who sits on the organization’s board, said:

“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. By working together and relying on the excellent work of fellow state regulators, we will be able to do even more.”

The remittances giant Western Union was one of the companies that took part in the pilot. Its associate general counsel Rosemary Gallagher said: “We firmly believe that the impact of this new approach to multistate exams will be significant in terms of driving harmonization and streamlining of state supervision across the board.”

Rick St Onge, the board president of the Money Transmitter Regulators Association and examinations chief for the Washington State Department of Financial Institutions said that this milestone was years in the making—adding that the next stage will involve “raising the bar” for multistate exam coordination.

“For over a century, state regulators have responded to evolutions within the money transmission industry, and networked supervision is the logical next step to more effectively and more efficiently supervise the growing number of nationally operating companies,” he explained.

Good timing?

The streamlining comes three months after reports suggested that PayPal was preparing to start directly selling cryptocurrencies to its 325 million users. If confirmed, it would be a major U-turn for a fintech giant that has long warned rampant volatility in the crypto markets makes Bitcoin impractical for everyday purchases.

For PayPal, the CSBS overhaul could speed up the payment processing giant’s entry to market and cut red tape.

Officials such as Linda Lacewell, who heads New York’s Department of Financial Services, have also welcomed the news. On Twitter, she predicted that the measures—which come into force in 2021—will make it easier for states to work together and protect consumers.

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.