CSBS Issue Talking Points - March 2021

State collaboration and advancements in technology are making the state system more effective and reducing regulatory burden. • States are implementing a series of industry recommendations as part of CSBS’s Vision 2020 initiative, including the Multistate Money Services Businesses Licensing Agreement (MMLA), which streamlines the money transmitter licensing process among 27 states, and MSB Networked Supervision, which will allow 75+ MSBs to operate nationwide with just one comprehensive exam starting in 2021. • States are building on the success of Vision 2020 to create a new approach to regulation called Networked Supervision that leverages technology, data and states’ collective knowledge to strengthen consumer protection and drive local and state economic growth. • The state system developed the NMLS in 2008 to license all nonbank mortgage and many other financial services. The NMLS is so effective that the CFPB also uses it to register mortgage professionals working in banks and credit unions. • A new regulatory platform built by the states, called the State Examination System, facilitates state interaction with license holders and fellow states through robust data management, risk scoping, collaboration tools and more. States are finding new ways to encourage responsible innovation in a rapidly changing financial services sector. • States have dramatically ramped up their engagement with fintech companies. To simplify fintechs’ licensing process, every state in the country named an innovation point-of- contact for money transmission, payments and lending. • States are building on this engagement, including the Illinois Department of Financial and Professional Regulation which established an Office of Innovation, and the Massachusetts Division of Banks which hosts regular webinars to discuss emerging fintech issues and offers Fintech Innovation Hours for banks and fintech firms to discuss financial technology with the Division’s leaders. • States are connecting virtual currency firms with consumers. In September, the Wyoming Division of Banking issued its first Special Purpose Depository Institution (SPDI) charter. The charter allows virtual currency firms to take deposits and conduct certain fiduciary activities. SPDIs are prohibited from making loans with customer deposits of fiat currency and therefore are not required to be FDIC insured. • States issue stand-alone virtual currency business licenses. The New York State Department of Financial Services has granted 25 virtual currency licenses since it introduced virtual currency regulation in June 2015, and Louisiana will soon begin issuing licenses pending the finalization of rules. The NYDFS has also proposed a conditional licensing framework for virtual currency that would allow new entrants to begin operating in the state by partnering with a current licensee. • States are enabling regulator-fintech collaborations. Through programs like the Independent Community Bankers of America and Little Rock Venture Center’s ThinkTech Accelerator program, and New York Department of Financial Services’ techsprint, state regulators are helping financial institutions, regulators and fintech firms work collaboratively to engineer new services and achieve accurate, real-time compliance validation.

FOR STATE REGULATOR USE ONLY