The state of New York has a somewhat unusual reputation when it comes to financial regulation. The state’s regulator is not too keen on the OCC’s bank charter pan for fintech firms. Overseeing the financial technology sector is a coveted price, and a national bank charter may not be the best idea. It is unusual to see NY state go after the OCC this way, although it remains unclear how things will play out.
Not too long ago, the OCC proposed their plans for a national bank charter in the fintech sector. In fact, the OCC would start accepting applications from fintech to become special -purpose national banks. These plans came to fruition after intense lobbying between fintech experts and financial institutions. This elevated status allows fintech players to operate across state lines without dealing with multiple jurisdictional requirements.
Then follow us on Google News!
NYDFS Is At Odds With The OCC
Unfortunately, that plan is not to the liking of the New York state regulator. The NYDFS has sent an angry letter to the OCC, blasting their plans to smithereens. Superintendent Maria Vullo feels technological advances are no excuse to usurp state laws regulating fintech activities. A rather strong sentiment, although not entirely surprising by any means.
NYDFS Superintendent Maria Vullo stated:
“The imposition of an entirely new federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape will invite serious risk of regulatory confusion and uncertainty, stifle small business innovation, create institutions that are too big to fail, imperil crucially important state-based consumer protection laws and increase the risks presented by nonbank entities.”
According to the NYDFS, the OCC has no experience when it comes to regulating nonbank financial institutions. Nor does the OCC have the authority to create this proposed charter. A national charter could end up stifling fintech innovation, rather than encourage it. Creating an unfair ecosystem is the last thing the fintech sector needs in the United States right now.
Over the past few years, New York state has proven to take aggressive stances to financial technology. Bitcoin service providers have to go through a thorough licensing process, which costs a lot of money. Moreover, there is no guarantee companies will obtain their license either. So far only a few business obtained their BitLicense. It appears fintech firms will have to go through similar struggles moving forward.
Header image courtesy of Shutterstock