OCC aims to simplify MSB national licensing requirements

Becoming an authorized money service business (MSB) in all 50 states has been challenging, even for technology giants like X, formerly Twitter, which reportedly gained MSB licenses in Arizona, Georgia, Maryland, Michigan, Missouri, New Hampshire, and Rhode Island, according to Adam Atlas, founder of Adam Atlas Attorneys at Law.

"When an MSB operates nationally, the licensing process requires dealing with each state individually," Atlas said, adding that MSBs must register with the U.S. government in all states in which they operate, which can cost millions of dollars and take years to complete. In fact, he noted, it is difficult for businesses to confirm the states where MSBs are licensed.

These barriers to entry inspired Atlas to launch MSBStatus.com in 2016, a service that compiles federal and state registration data into a comprehensive report. The time-saving resource provides payments industry stakeholders and attorneys with current information on the license and registration status of existing and prospective MSB partners, Atlas stated.

National license proposal

In a Feb. 21, 2024, address given at Vanderbilt University, Acting Comptroller of the Currency Michael J. Hsu shared insights on the evolving banking landscape, in which lines between bank and non-bank entities are blurring.

Hsu noted that unlike most other countries, the United States lacks a federal money transmitter licensing standard and authority. He recommended that Congress create a federal framework for payments regulation guided by the U.S. Treasury's September 2022 report on the future of finance, which made the following recommendations:

• Recommendation 1: Advance work on a possible U.S. CBDC if determined to be in the national interest.

• Recommendation 2: Encourage use of instant payment systems to support a more competitive, efficient and inclusive U.S. payment landscape.

• Recommendation 3: Establish a federal framework for payments regulation to protect users and the financial system while supporting responsible innovations in payments. •

• Recommendation 4: Prioritize efforts to improve cross-border payments, both to enhance payment system efficiency and protect national security.

Having seen companies that initially offered payment services expand into depository services, Hsu warned that massive withdrawal activities can deplete these players' cash reserves.

"Notably, many of these players started by focusing on facilitating payments—e.g., P2P, digital wallets, or embedded finance—then moved over time into adjacent activities, such as extending credit to customers and managing their cash," he said. Hsu went on to say that from a regulatory perspective, the OCC's focus is to ensure that bank safety and soundness is maintained, consumers are protected and the playing field is level.

Scott Talbott, executive vice president of the Electronic Transactions Association, stated that the ETA fully supports the idea of a national license for money transmission. "Our members offer money transmission services in all 50 states and the territories, so a single license will save time and expenses and provide a more consistent experience for consumers," he said. 

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