Hartford Business Journal

16 HARTFORDBUSINESS.COM | MAY 13, 2024 Master account A state charter is one thing, but the bigger objective for fintechs is the coveted Federal Reserve master account, which would allow them to transfer money directly to other entities with master accounts, cutting out the need to use a third party for transactions. In 2022, after a long debate, the Federal Reserve issued guidance for fintechs using novel charters like Connecticut's that want to apply for a federal master account. But since those new guidelines were passed, no fintech that doesn't already have a federal regulator has been issued a master account. In February, right around the time Banking Circle was cutting the ribbon on its Stamford digs, TNB, another Connecticut fintech startup, was appealing the Fed's denial of its master account application. Banking Circle is one of three fintech companies in Connecticut currently applying to the Federal Reserve for such an account. The Department of Banking says one of those three already has conditional approval, and it's confident that Connecticut will be among the first states in the nation to host a state-regulated fintech approved for a federal master account. For Moneycorp CEO Velizar Tara- shev, potential federal membership is a key draw of the Connecticut charter. His company offers international money transfer and online foreign exchange services. "There is a lot of friction in corre- spondent banking and international payments at the moment," he said. "What we're trying to do is to elim- inate that friction through creating direct payment-rail connections." Moneycorp was founded in London in 1979, and now has a global reach. It has bank licenses in Gibraltar and Brazil, and establishing one in the U.S. is central to its growth strategy. Moneycorp is already licensed as a money transmitter in all 50 states, with a U.S. head office in Providence, Rhode Island. Tarashev says the company has been researching unin- sured charters and other regulatory instruments for the better part of two years — he describes Connecticut's charter as "unique." "It allows us to cover exactly the sector that we're looking for," he said. The company has identified office space in Stamford where it expects to sign a lease within weeks. Initially it will locate between 20 and 30 employees there. Regulatory creep Bruce Adams is scrutinizing these developments from his seat as the president of the Credit Union League of Connecticut. And he has an insider perspective as a former state Depart- ment of Banking general counsel. He says his concern over the evolu- tion of the fintech industry is what he calls "regulatory creep." "If we can use an uninsured bank charter right now to stimulate business and to give legitimacy to a legitimate business, I think that's great," he said. "But, I think we should probably, in the final analysis, reserve the charter for its traditional purpose." He would rather see the depart- ment create a wholly new regulatory instrument to cover fintechs. On the positive side, he thinks Connecticut's aggressive stance does put it in a great position to be a leader on regulatory innovation. "Frankly, now Connecticut has an opportunity to build its regulations on its real-world experience regulating a business like this," he said. It's a job that Commissioner Perez is clearly relishing. In fact, his office has been pushing the legislature to change the name of the charter from uninsured to innova- tion bank charter, a move Perez says better reflects its future potential. With the increased interest, his staff is scrambling to keep up with inquiries — creating term sheets to make the charter application process clearer and more efficient. Perez says he expects his next challenge to be hiring and training enough people to keep up with the demand for this novel method of regulation. "Nobody has anything compared to us that the feds feel very comfort- able with," he said. "We're that much ahead of everybody else." Gov. Ned Lamont welcomes Banking Circle US CEO Kjeld Olson and his staff to their new Stamford office, at 750 Washington Blvd. PHOTO | CONTRIBUTED At Trinity Health Of New England, you receive care from board certified, fellowship trained orthopedic and neurosurgical spine surgeons along with physical medicine and rehabilitation physicians. Our dedicated multi-disciplinary care team includes physician assistants, nurse practitioners, nurses, physical therapists, and other providers all coordinated within the Spine Institute of Connecticut. Spine care is all we do, giving us broad experience in providing the best possible care and optimal outcomes. Learn more at TrinityHealthOfNE.org/Back. Your Spine, Our Expertise TrinityHealthOfNE.org/Back Bruce Adams Regulatory Modernization Continued from page 14

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