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A U.S. organization of state bank supervisors has finalized the text of a uniform money-transmission law that they want to supersede the different ones that they follow now.
The Uniform Money Transmission Modernization Act is designed to establish a single set of nationwide standards and create a detailed, risk-focused regulatory floor for all states to use.
It aims to regulate more activities, protect consumers and make business safer.
The text proposes standard interpretations for important terms such as money, money transmission, stored value and virtual currency.
It aims to require businesses that engage in virtual currency business activities to apply for state licenses and comply with “federal currency reporting, record keeping and suspicious activity reporting requirements as set forth in the Bank Secrecy Act and other federal and state laws pertaining to money laundering.”
After four years of working on it, the Conference of State Bank Supervisors (CSBS) approved the model law on August 9 and made this approval public at the MTRA 2021 Annual Conference on August 31.
The model law intends to solve a problem that is “uniquely rooted” in the American financial system, Paul Dwyer, CEO of Viamericas Corporation, said at the conference.
Although there are some federal laws that apply to money transmitters, these firms are generally regulated and licensed by states.
This allows states to tailor their laws to suit their individual circumstances and goals and provide a more flexible approach to new products and services.
Dwyer explained that the most significant innovations in fintech and the money-transmitter market could happen because state legislation promoted a culture of innovation.
However, as companies grow and aim to make a national footprint, it becomes complex for them to comply with different licensing and regulatory requirements in each and every state.
To solve these problems, federal legislators are thinking of promoting a federal standard that preempts state laws and the Office of the Comptroller of the Currency (OCC) has already taken steps to introduce a national license for payments and fintech firms.
Nonetheless, the CSBS believes that federal preemption is not the right answer to the complexity of state money-transmitter legislation.
Instead, it has created the Nationwide Multistate Licensing System (NMLS) for money transmitters with the aim of streamlining the licensing process and also the State Examination System (SES) in order to promote networked supervision.
“A common regulatory baseline across the country is a crucial step in advancing multistate harmonization in the money transmission industry, as states will be better able to work together in the licensing, regulation and supervision of money transmitters operating across state lines,” the Conference of State Bank Supervisors (CSBS) said.
In future, the CSBS will help states sign up to the new regime and try to make the implementation of the model law as uniform as possible among states.
During the process of preparing the model law, the CSBS consulted participants in the industry as well as the Electronic Transaction Association (ETA), the Money Services Business Association (MSBA), Financial Innovation Now (FIN, a group of big techs and fintechs), the Money Services Round Table, Circle, PayPal and Western Union.
