The Conference of State Bank Supervisors (CSBS), an organization of state financial regulators, will make it easier for financial technology payment firms and cryptocurrency exchanges to prove they're in compliance with U.S. state laws.
The CSBS announced a "One Company, One Exam" plan Tuesday whereby states will coordinate their supervisory exams for the nation's largest payment firms in an effort to reduce the costs on both state regulators and the companies they oversee. Essentially, the exam is how these regulators will make sure regulated entities are still in compliance.
What this means for cryptocurrency companies – such as Coinbase – is their compliance costs will drop. Rather than work with more than 50 different state and territory regulators, the exchanges only need to check in with the one group. The group of regulators includes every state but Montana, which doesn't have a money transmission license.
Crypto exchanges need money transmission licenses to legally operate within most states, with the state banking or financial services regulator overseeing this form of regulated activity.
"For the industry that means there's going to be a reduction in regulatory burden," said Matt Lambert, nonbank counsel for CSBS.
However, new exchanges will still have to apply for, and secure, a license for each state in which they hope to operate. While the CSBS is working on a potential standard for applications, there's still a long way to go.
At present the move also only applies to the 78 largest money transmitters in the U.S. – those operating in at least 40 states. While Lambert declined to identify which crypto businesses fit into this category, a search of the Nationwide Multistate Licensing System & Registry database indicates this could include Coinbase, Circle Internet Financial and Square.
The list of firms that will benefit from CSBS' announcement could still grow. While there aren't any plans right now to add to the list of companies, Lambert said more could be added later on.
'Strictest standards'
The CSBS announced its effort to consolidate supervision at least partly as a result of soliciting feedback from the crypto industry, and finding that regulated entities believed "there is too much supervision that is accomplishing the same thing," Lambert said.
"Overall I think this process will lead to high standards, the strictest standards," he said. "This is not going to be a means of defaulting to the lowest standards, this is going to be a method of raising the bar for everyone."
Each exam will be conducted by a group of state regulators, and the makeup of the group will change on an exam-by-exam basis. This lets the regulators coordinate among themselves to find the best fit for each company's evaluation.
The CSBS announced a "One Company, One Exam" plan Tuesday whereby states will coordinate their supervisory exams for the nation's largest payment firms in an effort to reduce the costs on both state regulators and the companies they oversee. Essentially, the exam is how these regulators will make sure regulated entities are still in compliance.
What this means for cryptocurrency companies – such as Coinbase – is their compliance costs will drop. Rather than work with more than 50 different state and territory regulators, the exchanges only need to check in with the one group. The group of regulators includes every state but Montana, which doesn't have a money transmission license.
Crypto exchanges need money transmission licenses to legally operate within most states, with the state banking or financial services regulator overseeing this form of regulated activity.
"For the industry that means there's going to be a reduction in regulatory burden," said Matt Lambert, nonbank counsel for CSBS.
However, new exchanges will still have to apply for, and secure, a license for each state in which they hope to operate. While the CSBS is working on a potential standard for applications, there's still a long way to go.
At present the move also only applies to the 78 largest money transmitters in the U.S. – those operating in at least 40 states. While Lambert declined to identify which crypto businesses fit into this category, a search of the Nationwide Multistate Licensing System & Registry database indicates this could include Coinbase, Circle Internet Financial and Square.
The list of firms that will benefit from CSBS' announcement could still grow. While there aren't any plans right now to add to the list of companies, Lambert said more could be added later on.
'Strictest standards'
The CSBS announced its effort to consolidate supervision at least partly as a result of soliciting feedback from the crypto industry, and finding that regulated entities believed "there is too much supervision that is accomplishing the same thing," Lambert said.
"Overall I think this process will lead to high standards, the strictest standards," he said. "This is not going to be a means of defaulting to the lowest standards, this is going to be a method of raising the bar for everyone."
Each exam will be conducted by a group of state regulators, and the makeup of the group will change on an exam-by-exam basis. This lets the regulators coordinate among themselves to find the best fit for each company's evaluation.
