Erik Rettig

This morning the Treasury Department released corrections to its final rule, Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Assets Transactions, which were first made public on June 28 and published in the Federal Register on July 9. Today’s release consists of 17 discreet corrections to that rule. In my review,* only one of these corrections is substantive enough to merit going back and looking to see if that correction changes your view of the final rule, and that correction is this: The fourteenth correction in today’s release changes page 56517 of the Federal Register (the top line of page 133 that you might have saved or printed out on June 28) to take out the second “not” in language that reads, “…a CFC digital asset broker not conducting activities as an MSB was [not] permitted to treat a customer as an exempt foreign person….” The other 16 changes are mostly typographical. A few of them are designed to indicate that Treasury received more than one comment on a particular issue involving the cost of reporting NFTs. This is obviously intended to show that Treasury and the IRS reviewed all relevant comments submitted to them, thus hoping to avoid an Administrative Procedure Act challenge to the final regulations in that regard. If you have any questions, we’re here to help. Taxbit *This is not legal advice. Your mileage may vary. Check with your first-year associate before dropping this into an email to your client. Also, I’m happy to walk that first-year associate through this if you want.

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Curious about the impact of #ISO20022 on fintech? NYPAY has a great panel this Thursday on the topic- it's free register below. ISO 20022 is poised to be a game-changer for the fintech industry, bringing about several positive impacts: 1. Enhanced Interoperability: Imagine financial institutions speaking a universal language. ISO 20022 acts as that common ground, allowing seamless data exchange between different systems. This translates to faster transactions, fewer errors, and a more streamlined experience for everyone. 2. Richer Data for Innovation: ISO 20022 goes beyond basic transaction details. It allows for including richer, more structured data. This empowers fintech companies to develop innovative financial products and services with a deeper understanding of user needs. 3. Streamlined Operations and Efficiency: With standardized data formats, automation becomes easier. This translates to fewer manual processes, reduced errors, and overall cost savings for fintech companies. Regulatory compliance can also be simplified with ISO 20022's structured approach. 4. Openness to New Technologies: The beauty of ISO 20022 is its adaptability. It can accommodate new technologies and business models as they emerge, ensuring fintech companies stay ahead of the curve. 5. Level Playing Field for Fintechs: Legacy financial institutions often have complex internal systems. ISO 20022 creates a more level playing field by providing a common standard that fintech startups can easily adopt. This fosters a more competitive and innovative financial landscape. Overall, ISO 20022 is expected to be a major driver of growth and progress in the fintech industry. By enabling smoother data exchange, richer information, and streamlined operations, it paves the way for a future filled with exciting financial products and services.

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The much anticipated Dodd-Frank 1033 rule was announced by the CFPB today. This marks a critical step in securing strong data rights for consumers in financial services. Plaid was founded on the belief that consumers should have a right to access and share their financial data in order to get the financial products that work for them, and we are proud to have played a small role in creating a thriving, competitive and dynamic digital financial system – one that holds so much promise for consumers as the industry becomes fully digitized. What does this mean for you? If you’re building products that leverage open banking, we’ve created a useful 1033 readiness checklist for you (https://lnkd.in/extB6r94) that we will continue to update. If you have customers that link accounts with other apps and services, we’ve created a suite of open finance solutions (https://lnkd.in/gUyX8by8) that help you better prepare. We’re excited to be part of this new era of open finance and to support our customers, partners, and consumers in this regulatory shift. Stay tuned for more insights and updates. Read more about what this new regulation means and next steps here: https://lnkd.in/gbcPvUMH

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The widening fallout from Synapse’s collapse and subsequent bankruptcy—and every bank and fintech partner swept up in it—continues to raise serious operational questions, cause lingering angst for customers still unable to access their money, and yet is utterly devoid of soul searching on the part of executives responsible for what transpired. Synapse, a Banking-as-a-Service (BaaS) provider backed by prominent venture capitalists, worked with as many as 100 bank and fintech partners—including Evolve Bank & Trust, Lineage Bank, Mercury, Dave, Yotta, Juno and Yieldstreet—serving as the intermediary between bank partners providing deposit accounts, loans and payment products and the fintechs that embed them into their customer apps. As the enormity of U.S. bankruptcy trustee Jelena McWilliams’ findings became public, what was also glaringly obvious: Some of the companies involved were so busy pointing fingers at each other that they failed to acknowledge that customers—all of whom were unwittingly tied to Synapse and its bank partners through their usage of fintech apps—have become collateral damage. That must change. Given the pace of financial innovation and the size of most BaaS banks—60% of BaaS banks have assets under $5 billion, while about 30% have assets under $1 billion, according to CCG Catalyst —the principles-based interagency guidance from the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency seems inadequate to prevent another Synapse-like event. The resolution of the Synapse bankruptcy will likely be precedent-setting, potentially dictating changes to the BaaS model to ensure greater stability and reliability, sharpening enforcement of existing bank regulations and forcing new and deeper straight-line federal regulatory oversight—perhaps via national charters—of BaaS providers and fintechs. My latest for FIN: The Fast Forward on Fintech.

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The financial system -- and especially the banking system -- is based on trust. The bankruptcy of Synapse has shaken that trust for fintech customers who can't access their savings (see the excellent story out today by Claire Williams for more) and that distrust can be contagious. Policymakers need to develop a plan to close the gaps between what banks offer and what fintechs advertise, but first they need customers to know that they feel their pain.

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Richland, Washington-based Gesa Credit Union plans to acquire Centralia, Washington-based @Security State Bank, the institutions announced Thursday in a press release. The deal, expected to be completed next year, continues the 2024 trend of credit unions buying community banks based in Washington. The $5.5 billion-asset Gesa CU becomes the fourth credit union to announce the acquisition of a Washington bank in 2024. Earlier this year, Harborstone Credit Union said it will acquire Burlington-based SaviBank, Sound Credit Union said it plans to acquire Olympia-based Washington Business Bank and Renton-based First Financial Northwest Bank is being bought by Alaska USA. With 10 whole-bank acquisitions struck by credit unions so far, 2024 is on pace to shatter the record 16 credit union-bank deals announced in 2022. Eleven credit union-bank tie ups were reached last year. The purchase price was not disclosed, but at more than $606 million in assets, Security State is one of the largest banks ever acquired by a credit union. Jeff Cardone, a partner at Luse Gorman, PC who served as legal counsel to Gesa Credit Union in the deal, told Banking Dive the biggest difference driving CU-bank deals in 2024 is that – given bank stock values, the interest rate environment and regulatory challenges – there are fewer bank buyers and, as a result, credit unions have filled the gap. “And the reason banks are larger [in 2024] is two-fold,” Cardone said. “Credit unions are the only realistic buyers that could pay cash and absorb the bank’s balance sheet from a purchase accounting standpoint, and the geography for these deals – [primarily] the Pacific Northwest and Florida – have larger bank targets than other market areas, such as the Midwest, which is comprised of a significant number of small community banks.” Gesa earned $10.8 million in the first quarter of 2024, a 21% decrease compared with a year earlier, according to call report data from the NCUA.

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Today the Federal Trade Commission issued a consumer alert on romance induced crypto-related scams. The engaging and well written alert by Colleen Tressler of the Division of Consumer and Business Education explains: "No one thinks their online love interest is going to scam them, but scammers are good at what they do. They establish an emotional connection with you so you’re more likely to believe that they’re an expert in cryptocurrency investing, for example. But that online love interest is a scammer. People have lost tens of thousands ― sometimes millions — of dollars to romance scammers." Here is the full consumer alert 👇 Kudos to the FTC for including helpful red flags 🚩 It all starts with someone contacting you — seemingly at random — on social media. But they’ve done their homework, checking out your profile and other information on the platform. That helps them say the right things to build a relationship…and before you know it, your new friend is talking money. They want to help you invest your money in the crypto markets, or they say they can teach you how to do it. You might think they have your financial well-being in mind, but they don’t. They only care about their own financial well-being. No matter what they say, if someone you meet online says they want to help you invest in cryptocurrency, it’s an investment scam. Know this: 🚩 Scammers promise big profits. They might say they’ve made money this way before and that you will too, but it’s a lie. No one can guarantee profits in any investment. 🚩 Scammers say there’s no risk. But all investments have risks, including investments in the crypto markets. 🚩 Scammers say they can help you learn to invest. They’ll say they can teach you investment tricks, but they’re really leading you to a scam investment opportunity. You will lose the money you “invest.” 🚩 Scammers tell you how to send the money. Scammers want your money quickly, so they’ll steer you to gift cards, payment apps like Apple Pay, CashApp, PayPal, and Zelle, money wiring companies, or even crypto. But only scammers insist you send money this way.    📢 If you think someone you met on social media is a scammer, cut off contact. Tell the social media platform, and then tell the FTC at ReportFraud.ftc.gov. They even included this social media savvy language! "Share this post in your socials to alert your followers of this scam." 👏

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🚨Solicitation Watch!🚨 As Mitchell Winans said below, a pre-solicitation notice for ITAS IV at FDIC has gone out. I’m excited about what’s been cooking inside FDIC on our tech transformation journey. Follow this solicitation! If you have expertise in AI, data, RPA, or building modern applications with beautiful design, consider responding to the RFP when it comes out. We need the best civic-minded technology firms on our team. Plain and simple.

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Having transparency and clear rules to define and adopt an open banking standard in the US is beneficial. Open banking relies on an open, common, and shared standard to ensure interoperability within the financial ecosystem. This is crucial for adoption and reducing integration costs. Therefore, such a standard is necessary. Today, the Financial Data Exchange (FDX), a non-profit organization in the US, has worked tirelessly with the financial community to establish these standards and publish their FDX APIs. There are already over 76 million FDX-ready accounts in North America, making it the de facto standard. Hopefully, the Consumer Financial Protection Bureau's published rules today will make it easier to recognize FDX as such. #openbanking #openfinance OpenFinity

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🔥 OCC just dropped several new enforcement actions, highlighting a BSA/AML one that everyone should read 🔥 💸 While the action doesn't mention BaaS specifically, it does highlight "Lacking oversight of third party payment processor accounts" which reads like onboarding of a fintech program without adequate compliance resourcing - which then leads to the cause for the Consent Order: "Failed to adequately monitor suspicious activity and file SARs" 🧑‍⚖️ Regulators continue to demand lookbacks, and not just for screening, but here for a SAR lookback, saying the Bank will review almost two years of activity "October 1, 2022 to January 5, 2024" for "activity flowing through the Bank’s third-party payment processor portfolio" 🚫 The Bank will also need to explain why SARs are NOT filed for some transactions "a list of customers, accounts, and transactions where, contrary to the conclusions of the SAR Look-Back, the Bank determined not to file a SAR or to amend existing SAR filings, and the reasons provided for that decision" Link in comments, and again, when you're onboarding a fintech program its always easier to put the compliance guard rails in at the beginning

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The triumvirate of US federal banking regulators is doing a regulatory stocktake re: consumer protection; directors, officers and employees; and AMLCTF. https://lnkd.in/gStxZAYJ

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Millennials are on track to inherit $27 trillion, and Robinhood is gearing up to be their go-to financial platform. The next big wave in wealth management is here! 💸📈 #Millennials #WealthManagement #Robinhood #FutureOfFinance

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AC Hsu's speech is tour de force level in terms of zeroing in on a very wide-ranging set of critical policy initiatives facing the banking system, fintech partnerships, and giving a heads up on the potential fate for the OCC preemption rules following the DFA. Look for: -- a number of important policy initiatives underway for the largest banks (capital, liquidity, operational resilience, and recovery planning), noting their continued growth trends (with a nod to "simple, dispassionate math"). -- the importance of additional granularity on approaches and engagement between FBAs and nonbanks and a first-time reference to Synapse/Evolve. AC Hsu revisits his frustration with increasing gaps between state money transmitter licensing and federal bank oversight, noting the need for prudential supervision of MSBs at the federal level and calling (again) for tailored federal payments regulation and supervision. --OCC history on the "wildcat banks" (with a visual to boot; not lost on this nerd). But what's superinteresting: "Increasingly banks are being asked by states to pick a side in service of performative politics rather than deliberative policy." **Cue national bank preemption and the live issue (post-Cantero and post-Loper Bright) on the fate of the OCC's preemption rules.** --> "We must fortify and vigorously defend core preemption, and we must embrace and develop more nuanced analysis when applying Barnett..." "Preemption [regarding safety and soundness and compliance with federal laws and regulations] is legally absolute and non-negotiable, and the OCC will act accordingly to defend that." "We need to develop a more nuanced and balanced approach to Barnett..." Kudos to Dan Awrey who is footnoted and has thought so deeply on banking and payments issues. More on some of these points in a future post. #payments #fintech #bankreg

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🚨 It's finally here.🚨  The Consumer Financial Protection Bureau just released a finalized rule that strengthens consumer rights, privacy, and security over their financial data. Most people may not have noticed Tuesday's announcement, but it's a significant step forward for "open banking" in the US. This innovation makes it easier for consumers to move their personal data between financial institutions—giving them more freedom and control. The US banking landscape is unique, with nearly 9,000 financial institutions (5,000 credit unions and 4,000 banks). Despite this, the average customer sticks with their bank for 17 years! 🤯 As market dynamics shift, we could see some interesting changes. Will customers leave big banks for better rates at smaller institutions—or the reverse, for better services? Could this be the push needed to drive pay-by-bank and real-time payments in the US? It’s sure to be a hot topic next week at Money20/20! #fintech #money2020 #payments #openbanking https://lnkd.in/gqkWAUbU

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This week, CDIA filed a comment to the CFPB on its proposed ban on medical debt credit reporting. The CFPB seeks to blind lenders and creditors from predictive and substantial medical debts. While the nationwide credit bureaus have removed around 70% of medical debt, the debt that remains is especially illustrative of a consumer's risk of not paying. For what may be the first time, the Bureau is saying more data is bad. Congress gave the CFPB great authority, but not to regulate medical debt. The Bureau must be called to account for its deviation from its mandate. Also, the Bureau seeks to ban data that it feels is less predictive, not un-predictive. The Bureau does not get to make that call and the "data" it relied on is stale and proves nothing. While the CFPB may be following its heart, it is not following the law.

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How will the CFPB's new ruling change BNPL? Last week, I wrote an article for The Fintech Blueprint discussing the Consumer Financial Protection Bureau's (CFPB) new interpretive rule and its potential impact on the Buy Now, Pay Later (BNPL) industry. Based on the CFPB's interpretation of the Truth in Lending Act (TILA), the ruling equates BNPL providers to credit card providers and forces them into a similar regulatory framework. Specifically, the rule will require BNPL providers to: - Investigate disputes raised by consumers and pause payments during the investigation - Credit refunds to the consumers' accounts when products are returned or services are canceled - Provide consumers with periodic billing statements akin to those received for credit card accounts While the CFPB's decision to tighten regulation was anticipated, the use of an interpretive rule instead of a formal amendment has caused some warranted frustration. Despite this, many BNPL providers, such as Affirm and Klarna, welcome the regulation. This is no surprise, as these companies have always emphasized transparency—with many already adhering to or exceeding the new rule's requirements. That said, this development underscores the ongoing challenges in BNPL classification and regulation. I encourage you to read the full article for a deeper dive into the implications. As always, if you find value in this discussion, consider subscribing to the Fintech Blueprint for more insights and analyses from the team.

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#OnlineFirst The Circle of Accountability: Examining Accountability when and Power-Related Implications in the Context of Credit Unions by Antonius Sumarwan & Belinda Luke This article focuses on Indonesian credit unions as member-based social enterprises. Using data from interviews, focus groups and secondary sources, the authors explore #Accountability practices in this context. Article is also #OpenAccess https://lnkd.in/ehwhbpkt

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There are a lot of innovative, present- and next-gen #fintech #payments solutions that have been stifled or co-opted for years by persistent #anticompetition, Visa arguably being the most obvious cause. I am pleased to see the U.S. Department of Justice stick with its #antitrust efforts, as it did when it blocked Visa’s acquisition of Plaid back in 2021. #banking #bankingandfinance

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Last week, the President nominated CFTC Commissioner Christy Goldsmith Romero to lead the Federal Deposit Insurance Corporation (FDIC). Over the last few years, I have gotten to know Commissioner Goldsmith Romero. In our discussions, both public and private, she has uniquely understood the importance of embracing innovation. Commissioner Goldsmith Romero has focused on crafting sound policy that allows innovation to flourish while protecting consumers and stopping illicit actors who seek to take advantage of new technologies. To that end, Commissioner Goldsmith Romero reconstituted the CFTC's Technology Advisory Committee of which I am the Vice-Chair. The Committee is made up of a diverse cross section of experts from both the public and private sectors and has published in-depth reports on both decentralized finance and artificial intelligence. Notably the committee has representatives from crypto firms from across the space such as Circle, Fireblocks, Espresso Systems, TRM Labs and others. The DeFi report - arguably the most comprehensive from any government agency - is a nuanced and technical discussion that sets forth the promise of DeFi - “financial system running on self-executing computer code, available to anyone on the planet with a computer and internet connection.” It then goes on to discuss myriad, but ultimately manageable risks. Most importantly, the 79-page report encourages engagement among industry and government to mitigate DeFi’s risks and prevent flight from the US of those building in the space. This is is exactly who I have known Commissioner Goldsmith Romero to be - a consensus builder who is not afraid to ask tough questions and tackle big problems through collaboration and teamwork. Commissioner Goldsmith Romero joined Digital Assets at Duke this year to engage with builders from across the crypto ecosystem and was a good enough sport to even rock a Duke sweatshirt. 🙏

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