TFU | May 13-19, 2017

Leading Off

The NYDFS sued the OCC over its proposed “fintech charter,” while the CSBS announced a new initiative to “modernize” state regulation of fintech firms; the CFTC created an internal fintech lab to engage with new products and innovators; SoFi is expanding into the wealth management market; the DTCC produced a new white paper on cloud-based financial markets infrastructure; and IBM is working to build “the world’s first securities lending blockchain platform.”

The Big Idea

More trouble for the OCC’s fintech charter.

The story:  The New York Department of Financial Services (DFS) filed suit against the OCC, alleging that granting special-purpose national bank charters to fintech firms would violate state consumer protection laws, create risky institutions, and “advantag[e] large players in the fintech industry.” And, in addition to supporting the NYDFS suit, the Conference of State Bank Supervisors (CSBS) released its “Vision 2020” initiative to “modernize state regulation of non-banks, including financial technology firms.”

Why we care:  As we wrote last week, it’s been a terrible, horrible, no-good, very bad month for the OCC. This week, it got worse. The NYDFS is one of the country’s strongest state regulators, so its suit carries clout and further underscores the fact that the states are vocally opposed to the OCC’s fintech charter proposal. The CSBS filed its own suit against the OCC in April, challenging the OCC’s legal right to grant special-purpose charters to fintech firms.

What we think:   Given these challenges, and reports that new OCC Comproteller Keith Noreika’s support of the fintech charter is tenuous, the future of the initiative looks decidedly bleaker than it did even a couple months ago. Stay tuned.

In Other News…

CFTC launches fintech lab.  The Commodity Futures Trading Commission (CFTC) created LabCFTC to “improve the quality, resiliency, and competitiveness of the markets” by promoting responsible innovation. LabCFTC will be based in New York.

SoFi rolls out SoFi Wealth.  Aiming to diversify into wealth management, the online lender will compete with established robo-advisory services like Wealthfront and Betterment. SoFi Wealth will offer “low-cost, tax-efficient investment portfolios” and “access to non-commissioned, licensed financial advisors.”

DTCC publishes white paper on cloud computing.  The Depository Trust & Clearing Corporation (DTCC) issued a new research paper on cloud-based financial market infrastructure. The paper covers several aspects of the transition to the cloud, including the DTCC’s belief in the technology’s “maturity,” implementation challenges, and risk mitigation benefits.

IBM to build new securities lending DLT platform.  Chile’s Santiago Exchange will work with IBM to create “the world’s first securities lending blockchain platform.” Project leaders expect that the project, which will use the Linux Foundation’s Hyperledger Fabric, will “reduce errors, [fraud], and processing time, while also improving transaction management and lowering costs.”

Google and PayPal partner on touch payments.  The two companies teamed up to allow Android Pay users with linked PayPal accounts to pay for goods with the touch of a fingertip when shopping in the Google Chrome browser.

The challenges of cashing out stolen digital currency.  The perpetrators of last week’s massive WannaCry cyber attack are said to have gained roughly $66,000 in bitcoin-based ransom payments. This week, the Wall Street Journal investigates the challenge they may face in attempting to “[convert] that bitcoin into cash with the whole world watching their every move.”

PBoC forms fintech committee.  China’s central bank, the People’s Bank of China (PCoB), created a new committee to conduct “in-depth research into the influence of fintech development on areas including monetary policy, financial markets, stability and payment clearance.”

Would Chinese MoneyGram acquisition pose risk to U.S.?  Chinese fintech giant Ant Financial appears poised to buy money transmitter MoneyGram for $1.2 billion, pending the approval of the Committee on Foreign Investment in the United States. Writing for the American Banker, Kevin Wack explores whether the acquisition could be nixed on “national security grounds.

Have a great weekend!
Joe Oehmke and Austin Tuell

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