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Federal payments licensing push could boost crypto adoption

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Brian Brooks, Coinbase’s former chief legal officer and the current U.S. Comptroller of the Currency, is pushing to consolidate licensing regulations for payment companies at the federal level in the United States.

Federal licensing for payments firms that do not accept deposits could open the door to further mainstream adoption of virtual currencies by allowing crypto payments firms to obtain approval to operate across multiple states. The U.S.’s patchwork of federal and state regulations has deterred many virtual currency firms from setting up shop in the United States.

However, analysts predict that many states will push back against federal licensing, citing an ongoing dispute over the OCC’s fintech charter with the New York Department of Financial Services. 

In an interview with Law360, Crowell & Moring partner Michelle Gitlitz said:

“It would surprise me if the same thing didn’t happen again. I don’t see why a regulatory institution like the New York Department of Financial Services would take a different position with respect to a payment charter than they did with the fintech charter.”

At the end of August, John Ryan, president of the Conference of State Bank Supervisors (CSBS), published a statement expressing the association’s opposition to federal payment licensing and accusing the OCC of “disregard[ing] the statutory limits of its authority.” 

“The OCC’s proposed payments charter is no different than the fintech charter already rejected in federal court and subject to a nationwide order preventing the OCC from accepting applications from a company that does not take deposits,” the letter said. 

“State regulators are opposed to this unconstitutional expansion of power.”

Despite this, the Office of the Comptroller of the Currency announced it was prepared to accept applications from payment firms for a federal banking charter last week.

Brian Brooks’ appointment to head the OCC has been welcomed by the crypto sector, with Celsius founder and CEO Alex Masinsky tweeting:





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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.