Thoughts on the May 19 Executive Order on Fintech Integration

This week’s executive order (EO) on "Integrating Financial Technology Innovation Into Regulatory Frameworks" is going to be read in a lot of ways over the next few weeks. Some readings will be too sunny and some too dismissive. Before either takes hold, it is worth walking through what the order actually directs, its legal mechanics, and what I think it means for the companies building modern payments infrastructure. This is likely the most consequential executive order we’ve seen on fintech regulation.

A note up front on those legal mechanics, because they govern everything else. The Federal financial regulators named in the order (CFPB, SEC, NCUA, CFTC, FDIC, OCC) and the Federal Reserve are independent agencies. The President cannot legally control their substantive decisions, but can use the EO to issue a rallying cry and provide a roadmap for their consideration. Section 3 reads as a directive because of how executive orders are written, but in operation, it functions as a request with significant political weight. Section 4 is drafted accordingly, in the language of "requests" rather than orders. Implementation will depend on each agency choosing to act, and on the timelines they are willing to keep.

Legal mechanics aside, it is worth noting that the Administration has installed its own appointees or interim directors at most of these agencies, and these persons are empowered to drive legally binding rulemaking. Just like in prior administrations from both political parties, these Senate-confirmed appointees are likely to respond to the EO’s call to action in a positive manner. The NCUA, however, currently does not have a sufficient number of directors to approve rulemaking under the Administrative Procedure Act. So, credit unions may not benefit from permanent policy changes made under this Executive Order.

What the Order Directs

Three things.

First, Section 3 asks every Federal financial regulator to conduct a 90-day review of regulations, guidance documents, orders, no-action letters, supervisory practices, and application processes that impede fintech firms from partnering with federally regulated institutions or from obtaining their own charters, deposit insurance, and other Federal licenses. Within 180 days, each agency is asked to take steps based on that review. The order is explicit that the balance to strike is innovation against safety and soundness, consumer and investor protection, market integrity, financial stability, and supervisory oversight. That balance is the right one. The fact that the order names it expressly will matter in implementation.

Second, Section 4 asks the Board of Governors to evaluate the legal, regulatory, and policy framework governing access to Reserve Bank payment accounts and payment services by uninsured depository institutions and non-bank financial companies, including firms engaged in digital assets and other novel activities, and firms participating as direct participants in real-time payment networks. The Board has 120 days to report findings, options, and recommendations to the President. The report is asked to address the Board's authority under the Federal Reserve Act and other applicable law, options for expansion under current authority, legal impediments, and the legislative or regulatory options that would address them, and the unresolved question of whether individual Federal Reserve Banks have legal authority to act independently of the Board in granting or denying access. The last point is the Custodia question, in other words, and it has needed a Board-level answer for some time.

Third, if the Board concludes existing law permits expanded direct access, Section 4(c) asks the Board to establish transparent application procedures and to decide complete applications within 90 days. A defined timeline is itself a meaningful change from current practice.

What the Order Does Not Do

A few things, because they will be misstated elsewhere.

It does not grant a master account to anyone. It does not preempt the Federal Reserve Act, the Bank Holding Company Act, the Federal Deposit Insurance Act, the Securities Exchange Act, the Commodity Exchange Act, or any other statute that governs the agencies named. It does not displace the agencies' safety and soundness, consumer protection, or market integrity mandates. It does not change the standards applicable to a charter or insurance application. And it does not change the fact that a great deal of what looks like supervision is in practice guidance, and what looks like guidance is in practice supervision, neither of which moves on a 90-day timeline without sustained agency commitment.

What the order does is move political weight onto the question of whether the United States supervisory system is too restrictive in how it treats fintech entrants, and onto the related question of which non-bank firms should be able to access the Federal Reserve directly. Both questions deserve to be addressed at the level the order directs.

Because of this, the next round of work is for the named agencies to identify regulations that need updating and to kick off the rulemaking process. As we’ve seen with things like open banking, anything that opens new competition or restricts fees will be attacked by incumbents. If you’re watching for an outcome — don’t just bet on Kalshi — get off the sidelines and make sure your company’s or industry segment’s voice is heard in this upcoming rulemaking process. Because you can already bet that the incumbents will be doing just that to try and limit the impact of these upcoming changes.

The Structural Shift Happening

The order describes a problem worth naming directly. For the last several decades, a company that wanted to operate in payments at any meaningful scale had two practical options. It could find a sponsor bank and operate within the four corners of that partnership, subject to the sponsor's risk appetite, technology, and regulatory standing. Or it could pursue a charter on a timeline measured in years and a budget measured in tens of millions of dollars, with no assurance of approval. The sponsor model has produced a great deal of innovation, but it has also produced concentration risk in a small set of sponsor banks, supervisory friction visible in the post-2023 enforcement cycle, and a structural ceiling on what companies can build.

Chartering has also been a yo-yoing process. States have tightened, and then loosened, and then tightened who needs a money transmission license. In 2016, the OCC attempted to launch a federal payments charter using its authority to charter special-purpose banks. Those banks looked a lot like the GENIUS Act model (focused activities, no FDIC insurance) and would have permitted payments companies to have nationwide products and services. But state regulators got upset and sued. Some companies like Block (née Square) were able to obtain Industrial Loan Charters, or banks that can be owned by commercial firms without running into the Glass-Stegall requirement that commerce and banking remain separate. But again, this was yo-yoed away with the change in presidential administrations, and firms that applied too late were locked out.

Meanwhile, Europe and other advanced countries created clear paths for non-banks to become chartered, operate country or union-wide, and also obtain direct access to government-run payment rails.

The Executive Order shows that this administration is ready to have the U.S. join the ranks of those other advanced economies. It contemplates fintechs obtaining their own charters on a reasonable timeline. It contemplates non-bank financial companies obtaining direct access to Reserve Bank payment accounts and payment services. It contemplates non-bank direct participation in real-time payment networks. None of this is decided. All of it is now on the agenda for regulators to sort out.

That matters because the next generation of payments companies will need to operate as payment service providers in a deep sense: holding their own licenses or charters where appropriate, operating their own connections to the core rails, and managing the full stack of money movement, compliance, and reconciliation themselves. That model has historically been available only to a handful of companies willing to spend decades building it. The order signals a federal posture that makes it possible for more companies to build it.

What This Means for the Companies We Work With

Modern Treasury is the infrastructure for companies operating that model. We build the system of record for money movement, the orchestration layer across multiple rails, and the controls and reconciliation infrastructure that regulated payment service providers need. Our customers use us to do what a PSP does, on rails they control, with the operational discipline supervisors expect.

The order changes what is possible on top of that infrastructure in three concrete ways.

For companies pursuing charters, the timeline assumptions just changed. Expect a wave of new applications later this year. The bar will be the same bar it has always been: operational discipline, books and records that reconcile, controls a supervisor can examine, and the kind of risk management that justifies the privileges of a regulated institution. The firms that earn approvals will be the ones that can show that work.

For companies that want direct access to the payment system, the master account question is finally being addressed at the level it deserves. I am not predicting an outcome. I am saying that firms ready to operate as direct participants in FedNow or RTP, or as account holders at a Reserve Bank, will need infrastructure that meets the operational requirements of direct participation. Real-time settlement is unforgiving of a missed exception, a stale ledger, or a broken reconciliation, and supervisors are unforgiving of firms that demonstrate any of those things.

For companies operating in digital assets and stablecoins, the explicit naming of these activities in both the fintech definition and the Section 4 access framework matters. Combined with the GENIUS Act framework, the federal posture toward dollar-denominated stablecoins is more coherent than it has been at any point in the past five years. A modern payments stack increasingly needs to treat stablecoins as a first-class rail alongside ACH, wire, RTP, FedNow, and cards.

PSP-Grade Infrastructure Should Not Be a Privilege of the Few

The constraint on payments innovation in the United States has not been a shortage of good ideas. It has been the combination of regulatory uncertainty and the fact that operating as a true payment service provider has been a privilege available to a small set of companies willing to spend a decade building the infrastructure themselves. Replacing that uncertainty with transparent processes, defined timelines, and consistent treatment across applicants is a public good. So is making the infrastructure for that model available to companies that earn the right to use it.

Three things to watch over the next six months. Whether the Section 3 agency reviews produce concrete changes to rules and guidance, or stop at memos. What the Board concludes in its 120-day report, particularly on the consistency of treatment across the twelve Reserve Banks. And whether the agencies that choose to act do so in a way that preserves the credibility of the United States supervisory system, because that credibility is the asset that makes American financial markets function.

Modern Treasury was built to be the infrastructure for companies that take payments seriously enough to operate the full stack themselves. The order does not change what we build. It expands the set of companies for whom that capability is now within reach.

If you are working through what the order means for your business, our team is available to talk it through.