Federal or State? The Future of Fintech Regulation in a Shifting Payments Landscape

As digital wallets, stablecoins, and new payment systems become more prominent in the U.S. financial ecosystem, a crucial debate is underway over the appropriate regulatory structure to safeguard users and the broader economy. In an article by Justin Bachman for PaymentsDive, perspectives clash on whether current state-level money transmission frameworks are enough, or if a federal payments charter is necessary to address systemic risks from large non-bank financial players like PayPal, Venmo, and emerging platforms such as Elon Musk’s X.

Cornell Law Professor Dan Awrey argues that the fragmentation of state oversight could pose serious financial stability risks, advocating for limited federal preemption or a new non-bank payments charter. Conversely, state regulators assert that modernization efforts, such as the Money Transmission Modernization Act adopted by 28 states, are sufficient and proven effective. The Financial Technology Association supports a federal charter for operational efficiency, though political and legislative inertia may delay progress unless catalyzed by a crisis.