The Bill Got a Hearing. The Benchmark Already Moved.
In April we published our read on the PACE Act — what it does,
what the 40-MTL threshold signals, and why the sequencing logic
matters for operators building now.
In May we published the harder version — the reserve
requirement economics, the unresolved state licence question,
the missing Senate companion, and why the bill matters more
as a benchmark than as a piece of legislation.
Three months in, here is the update.
What Has Happened
On June 24th, the House Financial Services Committee held a
hearing titled "The Future of Payments: Promoting Innovation
and Fair Markets," chaired by Republican French Hill.
Eileen O'Mara, Vice Chair of Stripe, testified in support
of the bill. Her argument was operational: "With the
patchwork quilt that we have to operate in, a lot of small
businesses are challenged with just knowing when that money
will clear, and when will they have access to it for the
services that they have already delivered."
Rep. Young Kim, the PACE Act's co-sponsor, argued that the
United States is the only G7 country without faster payments
regulation — and that charter reform and direct Fed access
would let small businesses make payroll and get workers paid
on time.
Both are commercially significant endorsements. A Stripe Vice
Chair appearing before a House committee to testify in favour
of a specific piece of legislation is not routine.
Then the Bank Policy Institute testified.
Paige Pidano Paridon, BPI's Executive Vice President and
Co-Head of Regulatory Affairs, put the counterargument on
the record in terms that were sharper than the press coverage
suggested: "Institutions seeking novel charters seek access
to the Federal Reserve payment infrastructure and the implicit
imprimatur of federal oversight without accepting the full
scope of those obligations. That is not a formula for
innovation. It is a formula for regulatory arbitrage."
That argument is now formally entered in the legislative
record. It will not disappear. It reflects the position of
the banks that sit behind the sponsor bank model the PACE Act
is designed to disintermediate — and it will shape what any
Senate version of this bill looks like, assuming one is ever
introduced.
That is the full legislative update. No markup has been
scheduled. No Senate companion has been introduced. The bill
is in the same committee it has been in since April 21st.
What to Watch For
The signals that would indicate genuine forward momentum —
in order of significance:
A Senate companion bill introduced. This is the single most
important development to watch. Without it, the legislative
path is closed regardless of what happens in the House.
A committee markup scheduled. A hearing builds a record.
A markup means the committee is moving toward a vote.
These are different things. No markup has been scheduled.
Federal Reserve Board public commentary on the master account
question. The Fed's position on direct access for nonbank
providers is central to the bill's practical implementation
and has not been formally stated. When it is, it will shape
the bill materially.
Further banking industry engagement. BPI's June 24th
testimony is the opening move. Community banking associations
and regional bank groups will follow. Their collective
position will determine how much the bill needs to change to
survive the Senate.
None of the above have occurred beyond what is described.
Why the Banking Counterargument Has Weight
Payments legislation that threatens incumbent bank revenue
does not move quickly through the American legislative system.
The record on this is consistent.
The OCC's special purpose fintech charter was proposed in
2016. Before a single company applied for one, the New York
Department of Financial Services filed suit challenging the
OCC's legal authority. A district court struck the charter
down in 2019. The Second Circuit reversed on procedural
grounds in 2021 — without resolving the underlying legal
question of whether the OCC can charter non-depository
institutions at all. No fintech company has ever received
the charter. A decade after the proposal, the legal question
remains open.
The Federal Reserve master account question — whether nonbank
fintechs can hold accounts directly at the Fed — is still
being litigated.
These are not cautionary tales about bad legislation. They
are accurate descriptions of how long it takes for payments
infrastructure reform to clear the institutional, legal, and
political obstacles that incumbent banking interests place
in its path when their revenue model is directly threatened.
BPI's testimony makes clear that the banking industry
understands exactly what the PACE Act is designed to do.
Their response will be systematic and sustained.
What Has Not Changed
The 40-MTL benchmark.
In the three months since the PACE Act was introduced, this
number has moved from a legislative proposal to a market
standard. Not because of anything that happened in committee
— because Baker McKenzie and Modern Treasury published
analysis of it, because the FTA, the Blockchain Association,
the Crypto Council for Innovation, and The Digital Chamber
endorsed it, and because Stripe's Vice Chair testified about
the principle it represents in front of a House committee.
The number 40 is now in the working vocabulary of investors,
acquirers, and enterprise procurement teams who have never
read the bill text and have no position on its legislative
prospects. It has become shorthand for what serious, scaled,
nationally-operating payments infrastructure looks like.
That meaning exists independent of enactment. A company with
38 active state MTLs is not the same company as one with 12
— not in a due diligence room, not in an acquisition
conversation, not in an enterprise RFP. That gap is real,
priceable, and growing regardless of what happens next in
Congress.
The First-Mover Position
If the PACE Act passes — in whatever form, on whatever
timeline — the OCC registration window will not be quiet.
Every operator that has been waiting to build their MTL
portfolio until after enactment will be filing at the same
moment as everyone else. The operators already at 40, with
a clean regulatory record and a documented BSA/AML
programme, will file in week one. Everyone else waits 12
to 24 months behind them.
That gap is built before the window opens. Not after.
Book a licensing assessment
The legislative side is what it is: a meaningful hearing,
the banking industry's counterargument formally entered,
no Senate companion, no markup scheduled. The build side
is where we can help.
If you want to understand where your MTL position stands
relative to the 40-MTL benchmark — and what a realistic
sequencing strategy looks like from where you are now —
that is the conversation a licensing assessment is built for.
Build for the benchmark. Not the bill.
