Latest / The Money and Banking Law Podcast with Joe Silvia / New Administration, New Regulations

Transcript

New Administration, New Regulations · The Money and Banking Law Podcast with Joe Silvia

• 0:01
  Hello and welcome to the Dwayne Morris Money
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  and Banking Law Podcast with Joe Silvia, brought
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  to you by the global law firm of Dwayne Morris.
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  I'm your host, Joe Silvia. I'm a former Federal
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  Reserve lawyer who represents banks, fintechs,
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  and other clients on M &A, payments, and regulatory
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  matters at Dwayne Morris. I'm also a core member
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  of our banking, fintech, and digital assets and
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  blockchain practices. The goal of the Dwayne
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  Morris Money and Banking Law podcast is to inform
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  and educate our clients and friends on both the
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  fundamental concepts and structure of the banking
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  ecosystem, as well as critical developments in
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  the law and regulation of money and banking.
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  On this episode, we're talking about a few of
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  the most significant changes in bank regulation
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  in 2025. We want to talk and focus today on a
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  few of the regulatory changes that we've seen
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  since the second Trump administration took office
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  in 2025. We'll touch on regulatory and policy
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  changes related to cryptocurrency, digital assets,
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  bank innovation, bank M &A, and some more related
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  issues with respect to examination, enforcement,
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  and regulation in the consumer finance space.
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  First and foremost, we've got to discuss the
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  significant focus and amount of policy and regulatory
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  action we've seen with respect to crypto and
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  digital assets. It's clear that the president
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  wants the U .S. to be the quote -unquote crypto
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  capital of the world. But it's also clear that
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  in implementing a policy focus on expanding access
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  and use of certain cryptocurrencies and digital
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  assets, the administration is heavily supportive
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  of integrating the digital assets, the digital
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  asset ecosystem, cryptocurrencies generally,
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  payment cryptocurrencies like stablecoins and
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  such into the traditional banking structure and
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  banking ecosystem in the United States. Now,
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  we already talked about updates to kind of crypto
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  policy in light of the Genius Act and focus on
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  stable coins in our first episode. So here, I
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  just want to touch briefly on some of what we've
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  seen from the banking agencies in this space.
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  More specifically, I want to touch very briefly
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  on what we've seen from the OCC over the last
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  few years in the form of interpretive letters.
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  In the previous administration, the OCC issued
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  interpretive letters 1170, 1172, 1174, and 1179.
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  Each of these interpretive letters addressed
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  different sub -segments within the cryptocurrency
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  ecosystem. For example, interpretive letter 1170
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  addressed the ability and authority for a national
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  bank to provide certain cryptocurrency custody
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  services for its customers. OCC Interpretive
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  Letter No. 1172 was an OCC Chief Counsel's interpretation
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  on the authority for national banks and federal
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  savings associations to hold stablecoin reserves,
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  the funding or the money that supports the stablecoin.
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  OCC interpretive letter 1174, again, an OCC chief
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  counsel's interpretation, this time focused on
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  the authority of national banks and federal savings
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  associations to use independent node verification
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  networks and stable coins for payment activities.
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  Finally, OCC interpretive letter number 1179,
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  chief counsel's interpretation, this one clarifies
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  the authority of a bank, a national bank, to
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  engage in certain cryptocurrency activities,
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  and then secondly, the authority of the OCC to
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  charter a national trust bank. In addition to
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  these interpretive letters, in 2021, we saw a
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  joint statement on crypto asset policy sprint
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  initiatives and next steps. The goal was to provide
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  greater clarity, quote unquote, on whether certain
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  activities related to crypto assets conducted
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  by banking organizations were legally permissible.
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  So in this publication from the agencies, we
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  saw crypto assets, safekeeping, custody services,
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  facilitating payments and purchases of crypto
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  assets, loans that are collateralized by crypto
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  assets like Bitcoin and other crypto assets.
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  issuance and distribution of stable coins, and
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  then some additional activities involving actually
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  holding crypto assets on a bank's balance sheet.
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  Since President Trump retook office, the second
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  administration has been on a crypto sprint to
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  try and make sure that the U .S. is the crypto
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  capital of the world, and they're trying to do
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  it in a number of ways. He's issued executive
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  orders. He's appointed and nominated individuals
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  to lead banking agencies. the SEC, potentially
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  the CFTC, and others with a focus on encouraging
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  additional activity with respect to the crypto
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  asset market and digital assets more broadly.
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  One of the kind of culminating features of this
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  approach that we saw just recently with respect
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  to the expanded crypto policy and a more flexible,
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  I guess, approach to cryptocurrency payments
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  and the banking system was a White House release
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  that's titled Strengthening American Leadership
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  in Digital Financial Technology. In this paper,
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  the White House outlines a number of areas where
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  the U .S. should be leading in financial technology.
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  The paper discusses and outlines the digital
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  asset ecosystem, market structure, the banking
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  ecosystem and digital assets, stable coins, payments,
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  taxation. And it also has a discussion about
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  what is really understood to be one of the highest
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  risks associated with cryptocurrencies, and that's
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  the risk of money laundering and how we counter
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  the risk of illicit finance in the cryptocurrency
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  space. So suffice to say, there's a lot more
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  work to be done in the area, and we expect...
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  a number of more policy updates, white papers
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  and the like from the administration, from the
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  banking and the financial markets industry going
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  forward and from those regulators as well. Given
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  the fact that we're in the early years of the
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  second Trump administration, I would also expect
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  some focus to develop on expanding opportunities
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  for investments in and access to the broader
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  digital asset ecosystem. Perhaps that's a focus
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  for another episode, as this area is continuing
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  to evolve day to day. A second critical area
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  that we've seen some significant change to recently
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  has come within the federal banking agencies
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  with respect to fintech innovation, novel activities
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  beyond just the cryptocurrencies and digital
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  assets focus. Anyone in the practice will know
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  that's familiar with banking and fintechs. There's
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  a lot of discussion and background with respect
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  to banks and fintech partnerships, engaging in
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  a number of different products, services, and
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  activities together, and other kinds of innovative
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  and novel activities. So the focus in this area
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  shouldn't be surprising. But it's especially
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  the case now that we've seen, for example, the
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  Federal Reserve just recently issued a withdrawal
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  of its previous supervisory program that was
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  going to be focused only on novel activities.
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  So it was called the Novel Activity Supervision
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  Program. It was released in August of 2023 and
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  covered activities related to crypto assets,
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  distributed ledger technology, complex fintech
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  and bank partnerships, and also traditional products
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  and services that are provided to crypto or fintech
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  companies. The goal of the supervision program
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  was as it was outlined, was to foster the benefits
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  of financial innovation while recognizing and
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  appropriately addressing risks to ensure the
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  safety and soundness of the banking system with
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  a risk -focused supervision and as a complement
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  to the existing supervisory processes at the
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  Federal Reserve. However, Federal Reserve recently
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  announced that it will sunset this novel activities
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  supervision program. And so what does that mean?
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  Well, in terms from the Federal Reserve, it means
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  that they'll simply return to monitoring and
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  examining their banks. their bank's specifically
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  novel activities through the normal supervisory
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  process. They indicated that since they'd started
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  their program in August of 2023 to supervise
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  and review certain crypto and fintech activities,
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  they've since strengthened the understanding
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  of those activities, the related risks, and the
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  bank risk management practices. So they're simply
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  integrating that knowledge into this existing.
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  supervisory program. There's no need for a separate
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  program now. We're putting it into the existing
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  supervisory program. This does seem like an encouraging
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  bit of news, especially for the banks that were
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  focused on potentially additional challenges
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  of having another separate supervision program
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  that was focused on these novel activities with
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  crypto and fintech partners, as opposed to having
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  it built within the existing supervisory program.
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  Another critical development we've seen since
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  the second Trump administration took office is
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  an increased flexibility or an apparent flexibility
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  with respect to bank mergers and acquisitions,
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  especially with respect to competition issues
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  and monopoly issues. In the bank merger and acquisition
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  space, We've seen at least one approval come
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  through with respect to a large transaction that
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  had a number of potentially complicated factors
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  associated with it. And we do expect more large
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  bank transactions in the future. We've seen a
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  few announcements come out. We've seen more at
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  the regional and community bank level. But with
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  the additional what I'll call flexibility with
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  respect to the regulatory approach to reviewing
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  M &A transactions, we do expect this area to
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  pick up a little bit, even despite higher interest
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  rates and economic uncertainty. We do expect
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  some additional activity in this area going forward,
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  especially in this year and into 2026, for a
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  number of reasons, not the least of which is
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  this increased flexibility. We've had speeches
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  from folks at the banking agencies, the federal
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  banking agencies, that have indicated that they
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  are looking forward to accepting applications
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  for M &A and hoping to alleviate some of the
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  concerns over the timeline, some of which have
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  been particularly extensive for approving those
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  mergers and acquisition transactions. Now, that's
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  at the federal level. So we'll see how that works
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  out at the state level for state chartered banking
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  institutions that will have to go through the
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  regulatory approval process at the state level.
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  But generally, we believe going forward, there's
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  what's perceived as a more favorable environment
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  for bank mergers and acquisitions, especially,
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  I think, in the regional and community bank system.
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  The final critical development that I want to
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  mention today relates to consumer finance regulation.
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  And it's the CFPB, as we all know, right? The
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  CFPB under the second administration has been
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  quiet and in fact has very few remaining employees.
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  But while the CFPB may be ignored for the time
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  being, what can be ignored is that we're seeing
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  a pickup in activity at the state level, especially
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  with respect to state AGs and state consumer
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  watchdogs, right? There's an increased activity
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  level with respect to consumer finance regulatory
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  enforcement issues. State agencies have been
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  increasing their activity since the CFPB has
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  taken a backseat. We expect the activity to continue
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  at the state level in the near term because at
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  the end of the day, while the CFPB may be quiet,
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  state and federal consumer finance laws have
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  not been thrown out and still exist and can still
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  be enforced against banks and other financial
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  institutions. So we really do expect the state
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  -level activity to be particularly robust with
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  respect to enforcement related to things like
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  fair lending and anti -discrimination statutes,
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  privacy of consumer financial information and
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  other privacy statutes, especially at the state
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  level, and data security of financial institutions.
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  Those are just a few of the areas that we're
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  seeing some pickup in state -level activity in
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  the enforcement space, but do expect more. So
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  yet another development to be aware of and to
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  consider in strategic planning at your bank or
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  other financial institution. I know it was a
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  brief episode today and we kind of covered off
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  on a few different issues pretty quickly, but
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  I really appreciate you guys listening. Again,
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  please subscribe, give us a like, provide some
• 12:55
  comments. That's all I've got for today. If you
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  have any questions from any of our episodes,
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  please reach out to me as always. Joe Silvia,
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  J -S -I -L -V -I -A at DwayneMorris .com or reach
• 13:09
  out to your favorite Dwayne Morris lawyer. Stay
• 13:11
  tuned for new episodes coming soon. We've got
• 13:12
  much more coming your way. So please stay tuned.
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  Look forward to hearing from you and thanks for
• 13:17
  joining. Have a great day.