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I recently read a book to my kids. It was Dr Seuss’ I Had Trouble In Getting to Solla Sollew which, if you don’t know the book, involves an arduous journey to Solla Sollew, “where they never have troubles! At least, very few”.
Solla Sollew is believed to be a place of hope and wonder, where “breezes are warm” and “people are kind”. It is a dream of the characters to find this incredible place, where they will find each other and be happy once and for all. However, they cannot ever find it, saying in the song “when I get close, it disappears”.
In fact, the hero of the book does get there, only to discover that the door is locked due to a key-slapping slippard recently nesting in the key hole.
How lovely and apologies if you haven’t read this book, so I’ve given away the ending.
So, why mention this? Well one of my LinkedIn friends, Adam Shapiro, just used this book as the basis of a view about banking and finance. The core view is that a fintech can jump through every regulatory hoop, but still trip over at the final hurdle because the regulators set the bar too high. As Adam puts it:
I doubt that a ‘key-slapping slippard’ is preventing the Fed, OCC, and FDIC from approving new charters and master account access, But nevertheless they’ve been highly disinclined to grant access for fintech companies. He continues: I can’t see the current group of federal regulators being prepared to approve PayPal in 2000, Square in 2008, Coinbase in 2013, or Chime in 2014. And points to Alex Johnson’s column asking for an American national fintech charter. Why doesn’t American have one? Because you have to remember that America is fifty states, and any fintech start-up needs a charter license in every single state.
Alex’s column is focused on the failure of Synapse, and the fact that many in the banking-as-a-service community suffered exposures as a result.
No doubt some of the US regulators are now sitting pretty, as they can point to this failure as a good example of why a national fintech charter should not be implemented. After all, the Office of the Comptroller of the Currency (OCC), which is the federal regulatory agency responsible for chartering and supervising national banks, published a paper exploring the idea of a special-purpose national bank charter for fintech companies back in 2016 ... and were promptly sued by the New York Department of Financial Services (NYDFS) and the Conference of State Bank Supervisors (CSBS), who argued that the OCC lacked the authority to charter a bank under the National Bank Act if the institution didn’t, at a minimum, take deposits.
Interesting.
Specifically these few paragraphs stand out from Alex’s column:
In a podcast interview in 2020, John Ryan (the former President and CEO of the CSBS) shared a story from a regional meeting of state bank supervisors:
One of the regulators said, “Hey, there’s this company that we’ve been having problems with, and we’re going to revoke their license.” And that caught other people’s attention around the table because that entity happened to be licensed in their states, and they wanted to know what this particular regulator had found. Curing those information gaps is foundational to what we are thinking about when creating a networked system of supervision.
As the end of that quote illustrates, the CSBS has been thinking about this coordination challenge as a technology problem; one that can be solved through investments in what it calls “networked supervision”.
There’s a lot more (a worthwhile read), and the bottom-line is that, like the hero in the Dr Seuss story, you can jump through all these hoops, climb over all these barriers, and then find the monster at the end that stops you breaking through to freedom and happiness.
Possibly, but then all of this jarred with me as I watched Donald Trump, the most likely next President, talking about CBDCs and cryptocurrencies (the themes of my latest book, which is all about the friction between central control versus the control of the people).
Interestingly, Mr. Trump appears to have come out in the camp of decentralising currencies rather than centralising them.
https://youtu.be/ZbRSjNdTuAg?si=9oZc7F59VEMGj0u_
Why is he taking this position? Because it’s a vote winner. As the Business Times reports:
Donald Trump met with Bitcoin miners in June and, in a subsequent post on his Truth Social account, said Bitcoin mining may be “our last line of defence against a CBDC,” referring to a central bank digital currency. He added that he wants all remaining Bitcoin to be “MADE IN THE USA!!!”
A vote winner with the mainstream American voters who are Libertarians. An interesting position and stance to take. The reason it is interesting is what position Donald Trump is taking here. Is he the killer of the key-slapping slippard or just endorsing crypto to get votes?
Related: What a New American Government Would Mean for Fintech