The PACE Act: What It Means for Your Licensing Stack

Congress introduced a bill last month that has generated more fintech commentary than anything since the Synapse collapse.

Most of that commentary has focused on what the PACE Act does. Almost none of it has focused on what it means for about which states to license in, in what order, and how fast; the specific decisions you are making right now.

First: What the PACE Act Actually Does

The Payments Access and Consumer Efficiency Act, introduced by Representatives Young Kim and Sam Liccardo in April 2026, creates a new category of federally regulated payment operator: the Registered Covered Provider.

Under the current system, direct access to Federal Reserve payment rails is reserved for insured depository institutions. Banks. If you are a fintech, you access those rails through a sponsor bank, which means you pay the intermediary markup, absorb the latency, and accept the operational dependency that comes with it.

The PACE Act proposes to change that. Qualified nonbank payment companies could apply to the OCC for registration as a Registered Covered Provider, and upon approval, access a payments reserve account at the Federal Reserve — with direct connectivity to all three major rails.

The policy rationale is straightforward: cost, concentration, and competitiveness. Direct participants pay fractions of a cent per transaction. Nonbanks accessing indirectly pay multiples of that through intermediary relationships. A small number of banks originate a disproportionate share of ACH volume. The PACE Act frames direct access as a structural fix.

It is also worth noting what the bill is not. It is not a lightweight path to Fed access. It is a parallel regulated regime — with 1:1 reserves, OCC supervision, ongoing examination, capital and liquidity requirements, and BSA/AML compliance standards that are materially equivalent to what a bank faces. Direct access in exchange for bank-like accountability. The trade-off is explicit.

The Number That Changes Everything

Here is where the industry commentary has largely missed the point.

The threshold for PACE eligibility is not incidental. It is the story.

To qualify as a covered provider, a company must hold at least 40 active state money transmitter licenses. Not 10. Not 20. Forty.

That number did not come from nowhere. It reflects a deliberate legislative judgment about what a serious, scaled, nationally-operating payment company looks like. Congress drew a line, and it drew it at 40 MTLs.

The implications of that line extend well beyond PACE itself.

For the first time, there is a federally legislated definition of infrastructure-grade licensing maturity. Not a rating agency's opinion. Not an investor's threshold. A standard written into a bill with bipartisan support, endorsed by the Financial Technology Association, the Blockchain Association, and the Crypto Council for Innovation.

If you are building a payments business and you are not thinking about your MTL count as a strategic milestone, this is the moment to recalibrate.

What the Sequencing Looks Like in Practice

The objection we hear most often is: "40 states takes years."

It does not have to.

The critical insight — and the one that Modern Treasury's legal team flagged in their PACE Act analysis — is that New York and California are not where you start. They are where you finish.

NY is widely understood to be the longest tent pole in the industry: two or more years for most applicants. Several other states run north of 12 months. Filing those first is the sequencing mistake that turns a 14-month programme into a four-year slog.

The alternative:

Tier III states — those with approval timelines of 60–120 days and streamlined application requirements — can be filed first and won quickly. A well-organised company can hold 15–20 approved MTLs within six months of starting. By month 12, with parallel filing across Tier II states, 35–40 approvals is an achievable position.

The strategic move, as several legal commentators have noted, is to prepare your OCC application in parallel with the final stretch of state filings — so that you are ready to submit to the OCC the moment your 40th license clears.

The combined timeline: 12 to 18 months from a standing start to OCC application-ready. That is not a long game. That is a 2026 decision with a 2027 or 2028 outcome — which puts you in the first wave of PACE applicants if the bill passes, and leaves you with the most defensible licensing stack in your market if it does not.

The Trade-Off Nobody Is Writing About

The PACE Act does not eliminate regulatory burden. It restructures it.

A Registered Covered Provider would be required to maintain 1:1 reserves against all customer obligations at all times, held in cash, Federal Reserve balances, or short-duration Treasuries. No float income. No fractional reserve model. Full segregation of customer funds.

If your current business model relies on float, that is a structural change — not a compliance adjustment. The economics of the PACE Act framework need to be modelled before the application is filed, not after.

There is also an unresolved question around state license retention. The bill, as written, is not fully clear on whether OCC-registered providers can shed their underlying state MTLs or must continue to carry them — along with their reporting requirements, onsite examinations, and renewal obligations. Legal commentators have flagged this as a point that states may litigate. A company considering PACE qualification should model both scenarios.

And then there is the legislative reality: as of today, the PACE Act has no Senate companion bill. It is a House introduction. The road from introduction to enactment is long, and the implementation details that will determine how meaningful the bill becomes in practice — how stringent OCC supervision becomes, how the public benefit test is applied — are not yet settled.

What This Means for Your Business Right Now

Here is the bottom line, regardless of whether the PACE Act passes:

The 40-MTL threshold is now the market's working definition of a scaled, regulated payment operator. That standard does not disappear if the bill stalls. It has been named, publicly, in a bipartisan piece of legislation with broad industry endorsement.

Investors who have followed this bill will carry that benchmark into due diligence. Enterprise procurement teams evaluating payment partners will reference it. Sponsor banks who know you are 38 MTLs deep will negotiate with you differently than they will with a company sitting at 12.

The licensed infrastructure you build toward PACE qualification is the asset that compounds — whether or not Congress delivers on the legislation.

The fintechs that benefit most from PACE will be the ones who started building before it passed.

Know Where You Stand

To help you assess your current position against the PACE Act's eligibility criteria, we have built the PACE Act Readiness Scorecard — a structured self-assessment across six categories: MTL portfolio, BSA/AML programme, reserve and capital structure, governance, operational readiness, and strategic timeline.

It takes 10 minutes. It tells you exactly where your gaps are and what to prioritise next.

Download the PACE Act Readiness Scorecard

Ready to Build the Stack?

If this piece raised questions about your current licensing position — or confirmed gaps you already suspected — that is where we come in.

TransBridge Advisors works with fintech operators at every stage: first MTL application through full portfolio management, BSA/AML programme build, and OCC application strategy. We are the team that has done this before, across the states that matter, in the sequence that works.

Book a licensing assessment

The PACE Act has not yet been enacted into law. This article is for informational purposes only and does not constitute legal advice. Eligibility criteria and OCC implementation standards may evolve during the legislative process.