CSBS Seeks Comment on Model Law for Money Services Businesses

Financial Services Law

The Conference of State Bank Supervisors (CSBS) has proposed legislation for adoption by the states in an effort to streamline and make uniform requirements for money service businesses (MSBs).

The proposal is in furtherance of the CSBS’ goal to have all 50 states adopt uniform legislation for nonbank supervision, as part of its Vision 2020 project. The proposal is an attempt to make it easier for traditional money transmission companies and new fintechs to operate on a multistate basis.

What happened

In 2017, the CSBS launched Vision 2020, a series of initiatives intended to modernize state regulation of nonbanks, including nondepository lenders, money transmission companies and fintechs, in the hope of achieving a more efficient state regulatory system.

Thus far, the initiative has resulted in a multistate agreement to coordinate the licensing and review process for MSBs, which 23 states have signed on to.

Most recently, the CSBS asked for public comment on a model MSB law based on the Uniform Money Services Act. The model law focuses on three primary objectives:

  • Regulation must sufficiently protect consumers from harm, including all forms of loss;
  • Regulation must enable the states’ ability to prevent bad actors from entering the money services industry; and
  • Regulation must preserve public confidence in the financial services sector, including the states’ ability to coordinate.

The CSBS identified several issues for commenters. They include ensuring consistent definitions for key terms such as “money,” “money transmission” and “virtual currency”; what activities should be exempt from licensing; the level of bonds and permissible investments; and an approach to evaluating safety and soundness of a licensee.

Following the public notice-and-comment period, the CSBS will consider the input and make changes to the draft as necessary. Once approved, the model law will be used as a policy foundation for all other aspects of MSB regulation, the group said.

The model law “is a key component” of the work of Vision 2020, CSBS president and CEO John Ryan said in a statement. “A 50-state law for money transmission offers nationwide consistency for companies, access to innovative financial products for citizens and more effective supervision by state regulators.” Comments will be accepted on the draft until November 1, 2019.

Why it matters

A proposed model law will further the CSBS’ goal of achieving a measure of uniformity, compared with the need today to comply with 50 different state laws. Enactment of a uniform law by the states would no doubt be a welcome change for the many companies that must now navigate the differences—both large and small—inherent in the 50 state system.



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