Wall Street Journal writers Rachel Witkowski and Telis Demos reported last week that, “Some financial-technology upstarts are concluding it is better to be regulated than not.
“Take Circle Internet Financial Ltd., a digital-payments company. Concluding that licensing would make it easier to do business, its executives last year sought a charter from a federal banking regulator, people familiar with the matter said. A charter would subject Circle to more scrutiny but make it easier to do business nationally.”
The Journal article noted that, “The prospect of obtaining a federal banking license ‘is appealing, both because of our long-term strategy but also because it takes a lot of the cost and complexity of working with many third parties out of the equation,’ said Circle Chief Executive Jeremy Allaire, who declined to comment on specific government discussions.
“‘We need to be open to discussing it and working through it,’ said Comptroller of the Currency Thomas Curry, referring generally to bank charters for fintech companies. ‘And I think that’s the sea change in attitude here at the OCC.'”
Last weeks article added that, “Nonbank fintech companies often fall outside the current boundaries of federal oversight, and many see that as an opportunity to nimbly do business that traditional banks don’t pursue…[A]bsent some kind of federal charter, some fintech companies that want to make sure they don’t run afoul of rules go through the process of getting licensed by each state to perform services like making loans or transmitting money. An OCC charter would offer federal pre-emption from some state-by-state requirements.
“A charter also would bring closer regulatory scrutiny of a fintech firm’s business plan, as well as requirements to comply with certain federal banking laws, like the Community Reinvestment Act, which says, among other things, institutions must serve low- and moderate-income neighborhoods in their region.”
