#286—OCC calls for federal payments license
Also, crypto’s purpose
Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out our last report here.
This week:
OCC calls for federal payments license
Crypto’s purpose
CFTC oversight over crypto gets renewed push post-FTX
It’s not looking good for another big community bank
Stuff happens
1. OCC calls for federal payments license
Some might argue that the current payments licensing regime in the U.S. is lose-lose. It’s rough for upstarts who need to obtain licenses from each individual state while navigating a diverse web of regulatory requirements.
And according to acting OCC chief Michael Hsu, that same diverse web of regulatory requirements (and potential lack of oversight) serves as a systemic risk to the system at large. Moreover, Hsu believes that the rise of fintech means that payments companies increasingly offer bank-like services.
Hsu has acknowledged these risks in the past. Here’s Payments Dive (via Sam Ostler):
Hsu raised concerns about the growing payments industry in 2022, during a conference hosted by The Clearing House and the Bank Policy Institute in New York City. Big tech companies moving into payments and lending was changing the risk profile of banking in “profound ways,” he said at the time.
Two years later, Hsu’s concerns remained the same. He pointed to “deposit-taking-like activity” from payments companies as particularly concerning. “Any entity managing money on behalf of customers can face a run if those customers have doubts about the safety of their money,” Hsu said.
Speaking at Vanderbilt University the other week, Hsu publicly affirmed the need for a national licensing regime for the first time. Payments Dive, again:
Wednesday’s speech was the first time Hsu has publicly supported the recommendation from a 2022 Treasury Department report that Congress create a federal framework for money transmitters, a spokesperson for the Office of the Comptroller of the Currency confirmed via email. The OCC is an independent bureau within the Treasury Department.
“State oversight of nonbank payment providers varies significantly, and is generally not designed to address run risk, payments risks, or other operational risks in a consistent and comprehensive manner,” the report said.
Relevant:
Via Sam Ostler—OCC wants federal money transmitter license
EU adopts euro instant payments rules to take on Visa, Mastercard
2. Crypto’s purpose
Crypto has come a long way in the last 15 years. Over time, a few key use cases appear to have emerged. Bitcoin, the original crypto, today, serves as a store of value—one that Americans can now invest in from their 401ks thanks to the approval of an ETF. Ethereum and its emerging competitors like Solana offer native smart contract support, which enables things like DeFi and NFTs. Then there’s companies like Ripple, which focuses primarily on payments.
Then you have the rise of stablecoins, falling into the not-quite-crypto category—tokenized fiat money, powered by blockchain.
So you have value, trading, and tokenization.
Meanwhile, the forward momentum toward regulations means that crypto activity will finally be accommodated officially by governments.
But what of crypto’s purist promise for web3 or at the very least, use as the internet’s digital money? And where does crypto go from here?
That, based on how ETHDenver went, according to Blockworks, still remains a bit nebulous. The vibes? Phenomenal. The overarching narrative? Unclear.
Here’s Blockworks:
But good feelings aside, no one at ETHDenver seemed to agree on what exactly ETHDenver was all about.
One exchange executive told me it felt like Bitcoin’s DeFi use cases were the spotlight. A founder said this was the year of consumer crypto. Elsewhere, I heard decentralized AI was getting the most attention.
I brought up this lack of consensus in a conversation with Doug Petkanics, the co-founder of decentralized streaming platform Livepeer. It was Petkanics’ fifth ETHDenver, he told me, and he wondered aloud whether crypto hadn’t outgrown these sorts of industry-wide events. In the late 2000s, New York City began hosting “Internet Week,” Petkanics recalled, though that would seem far too broad a category for a conference today.
Different sectors of the internet now hold their own conferences, and perhaps Web3 is headed for the same fate.
…
“A lot of people, they feel really overwhelmed by ETHDenver. The quality of the average interaction is not very good. A lot of VCs, a lot of shilling,” Sheng said. “It’s like, overwhelming, a sea of information. You’re not sure what’s high quality. And so I think curators are really valuable today.”
Elsewhere, Telegram announced a revenue sharing plan for its users—paid, of course, with Toncoin:
Next month, channel owners on Telegram can start receiving financial rewards from their work.
Broadcast channels on Telegram generate 1 trillion views monthly. Currently, only 10% of these views are monetized with Telegram Ads — a promotion tool designed with privacy in mind.
In March, the Telegram Ad Platform will officially open to all advertisers in nearly a hundred new countries. Channel owners in these countries will start receiving 50% of any revenue that Telegram makes from displaying ads in their channels.
Relevant:
Cheatsheet: Stablecoins mint $7.7B since bitcoin ETFs, beating inflows
Morgan Stanley Evaluating Spot Bitcoin ETFs for Its Giant Brokerage Platform: Sources
3. CFTC oversight over crypto gets renewed push post-FTX
Here’s Politico:
Our Meredith Lee Hill scoops that Senate Agriculture Chair Debbie Stabenow is diving back into negotiations on crypto legislation, amid an impasse in farm bill talks. The Michigan Democrat said in an interview that top lawmakers in both chambers are exploring efforts to advance legislation in the coming months.
The Agriculture Committee is involved because it has jurisdiction over the CFTC, which Congress is considering giving greater crypto powers. Stabenow is also exploring a bill to reauthorize the CFTC.
Stabenow took a stab at legislation to expand the CFTC’s crypto authority a couple years ago but it lost momentum after the collapse of FTX, which was a lobbying force behind it.
Not everyone was happy with that momentum:
The watchdog group Better Markets, which was highly critical of Stabenow’s legislation from a consumer protection perspective, is speaking out against the bill’s revival.
“The CFTC must receive a very substantial, multiyear increase in funding that would enable it to undertake any additional responsibilities before any legislation expanding the duties of the CFTC are considered,” Better Markets CEO Dennis Kelleher said in a press release the group is releasing today. “Moreover, notwithstanding numerous very serious concerns, if Congress decides to enact any legislation regulating the crypto industry, it must carefully ensure that the CFTC and the SEC each fully retain their current jurisdiction and authority to regulate and police the commodities and securities markets, which have well-served Americans, the financial system, and the economy for many decades.”
Georgia State University assistant professor and Roosevelt Institute fellow Todd Philips responded to that criticism the next day:
“Dennis is right that the CFTC would need a funding increase to tackle the crypto commodity spot markets, but to say that this increase must come before substantive legislation is just not how Congress works,” Phillips said.
“The fact that the crypto commodity markets are not regulated is hugely problematic, and, as Dennis rightfully noted, it is important that the CFTC and SEC fully retain their jurisdictions. The DCCPA [Stabenow’s bill] in 2022 strived to do this, and although the marked-up legislation had provisions that inadvertently crossed that line, Better Markets’ identification of those provisions after the markup helped improve the bill,” he added.
The big picture: “What should be of more concern to crypto skeptics than the DCCPA is that this Supreme Court is poised to weigh in on the question of whether or when crypto assets are securities. I doubt that this 6-3 court will retain the broadest version of the Howey Test, and if the court narrows Howey so that more crypto assets are commodities, it becomes even more important that spot legislation is in place. Just as Congress works to craft commodity legislation, it should work to codify an expansive vision of Howey.”
Relevant:
4. It’s not looking good for another big community bank
Here’s Bloomberg:
Commercial real estate lender New York Community Bancorp said it discovered “material weaknesses” in how it tracks loan risks, wrote down the value of companies acquired years ago and replaced its leadership to grapple with the turmoil. The stock plunged.