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Hi there, John here.

Every time I come to write this missive, I try to review and ponder what’s happened over the past two weeks and what may be most important to you, a fintech person. It’s tough because there’s so much. You and your companies are so popular and in some circles very popular and in others, not popular. C’est la vie.

And, there’s always so much crypto. So much crypto. And so much Gensler. So much Gensler. But, we have to do some of it otherwise I lose this job and I have a beabull at home to support. In the interest of fairness, I’m going to highlight a few things I think are important, but maybe haven’t received a ton of attention.

CHANGING THE STATE-US QUO (idc if you don’t like this pun)

Often overlooked in the daily federal, international, and supranational barrage of fintech regulatory developments in the US is that we have a lot of states with a lot of different rules. As many of you know intimately well, the states at an individual level play a large role in the regulation of fintech products being offered to American citizens. Some of you may think *too large*. And for you people, state regulators are hearing you and trying to do something about it.

In early September, the Conference of State Bank Supervisors (CSBS) released the Money Transmission Modernization Act (also referred to as the Money Transmitter Model Law, which is obviously much catchier...)

For those who don’t know, CSBS is a group of all the bank commissioners in the United States. They get together and share best practices, things they are seeing in the marketplace, and try to figure out what - if anything - they should be doing to stay ahead of the curve.

Sometimes there are things, like “fintech”, that are so wide-reaching that the bank commissioners come together and say, “Maybe we need to rethink some things and modernize some stuff and let’s all try to agree on it so it’s not annoying for everyone.” So, they come up with model laws that can be handed to state legislatures and hopefully passed “as-is” so that - despite the fragmented nature of so many states and each having their own commissioner - the country has a united treatment. This is intended to help make things less annoying for everyone.

The Model Law (which came after several years of work) hopes to address one of the biggest pain points cited by nonbank payments companies: the inconsistency in State money transmission laws. As you probably already know, a startup payments company must do a 50-State review to determine where they need a license and the answer is not always clear, especially for firms in the crypto ecosystem. The Model Law seeks to replace all current State money transmission laws with a more consistent and uniform set of standards for money transmission licensing and supervision, including both fiat and digital currencies.

You may say, “Well, if every state doesn’t do this, then isn’t it worthless?” Legislation of any sort is hard to pass, but there’s been some examples where CSBS has been successful. And, let’s face it, money transmission laws aren’t the hottest issue states might be focused on today and might be esoteric enough to just rubber stamp.

Anyway, I’m borrowing heavily from the expertise of my colleague David Cotney (former Chair of CSBS and former bank commissioner of Massachusetts) and there’s a lot more to say. If you want to learn more, email me and I can send you a fuller rundown and put you in touch with David.

THE FED HELPING YOU WITH BD

While the big banks vs. fintechs battle royale never really played out like some thought it would, where the real tension has been is with the smaller, local, community banks. JPMorgan can spend a lot of dough to hire talent and develop fancy products, your local farmers bank can’t.

With that in mind, a few weeks ago, the Fed released a report titled, Community Bank Access to Innovation through Partnerships. The report lays potential partnership opportunities between community banks and fintechs, describes the most pressing problems those banks are facing, and where they may have opportunities to develop new products like digital wallets (among others).

The paper highlights three major areas in which community banks may want to partner with fintech companies (read: what you might be able to sell/offer to community banks):

• Operational technology partnerships, which aim to enhance a bank’s processes, monitoring capabilities, or technical infrastructure
• Customer-oriented partnerships that enhance various customer-facing aspects of the business
• Front-end fintech partnerships, where fintechs interact directly with the customer in providing banking products and services

To help you along, here are a few of the community banks’ pain points:

• Balancing between offering a broad range of services to attract customers and staying hyper-localized to remain a pillar of their communities and attract customers from their immediate vicinity
• Providing products that pertain to their specific and local customer base
• Increasing deposits as they continue to lose market share to larger banks

WALL OF WHITEPAPERS

Over the past two days, approximately five industry-driven different reports/whitepapers/proposals/frameworks related to fintech were released. Maybe there were others that I missed, idk, it’s been tough to keep track.

I include them via links below. The first three are crypto related and the last two are more broad. The reports, in their own ways, advocate and lobby for regulators and policymakers to take specific treatments or viewpoints as it relates to lending, payments, data-sharing, consumer protection, securities issues, and other things.

I admittedly didn’t read them all yet, but you should try.

• ​Coinbase’s Digital Assets Policy Proposal​
• ​FTX’s policy goals for crypto market regulation​
• ​A16’zs Agenda for the Future of the Internet​
• ​Plaid’s The Fintech Effect: Fintech’s Mass Adoption Moment​
• ​A Smart Solution to Advance Consumer-Centric Payments Innovation in America​

GENSLER: LATEST YOUTUBE INFLUENCER

If the whole “regulating the securities markets” thing doesn’t work out, SEC Chair Gary Gensler looks to have a promising career on YouTube. Please look at this latest video about the clawbacks rule. It’s very slick and that studio looks like a place where Goop would film a makeup tutorial. I half expected him to tell me to smash that like button at the end. In all seriousness, that’s some pretty good production quality. One suggestion for the Chair and his team: Please do a twitch stream of you playing Animal Crossing and using the Turnip Market (aka Stalk Market). By law, the President would have to make you Treasury Secretary immediately...

Thanks ya’ll and buh bye until next time!

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John Collins is a Founding Partner at FS Vector, a fintech regulatory advisory firm based out of Washington, DC, where he leads the firm’s public affairs and regulatory strategy group. Prior to that he was a senior staffer in the U.S. Senate and helped lead the American Bankers' Assocation international fintech policy work. He was early employee of Coinbase, where he served as Head of Policy, explaining the company (and bitcoin) to policymakers around the world.