Immediately after the U.S. Department of the Treasury announced its recommendations for regulating FinTech, the Superintendent of the New York Department of Financial Services attacked. First, Superintendent Vullo heaped scorn on the Treasury Department's endorsement of regulatory "sandboxes" for FinTech companies. She ridiculed the proposal by stating that the "idea that innovation will flourish only by allowing companies to evade laws that protect consumers, and which also safeguard markets and mitigate risk for the financial services industry, is preposterous." She continued to mock the proposal endorsed by Treasury Secretary Mnuchin, using the taunt: "Toddlers play in sandboxes. Adults play by the rules."

Superintendent Vullo then turned her guns on the Office of the Comptroller of the Currency, which had announced that it would issue national charters to FinTech companies. She announced that the DFS strongly opposes the OCC's decision to begin accepting applications for these charters. This is unsurprising because the DFS previously sued the OCC when it announced that it was considering issuing charters to FinTech companies. A federal judge later dismissed that lawsuit as not yet ripe because the OCC had not yet decided to issue charters. However, in light of the OCC's decision, we can expect the DFS to renew the lawsuit.

The tone of this new announcement by Superintendent Vullo continues the escalating attacks that New York's DFS has made on federal agencies. As readers of this blog know, last year Superintendent Vullo suggested that the OCC's ineptitude as a regulator permitted HSBC Bank US to engage in the money laundering transactions that resulted in HSBC being fined $1.9 billion in 2012.

While this battle between state and federal regulators is fascinating, the FinTech industry is hoping that regulators will resolve their differences and clarify the regulations that apply to FinTech companies. Until then, regulatory uncertainty will continue to vex this burgeoning industry.

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