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Hey Fintech Nerds 👋

PayPal adding UPI and Chinese wallets this week was a timely reminder that while stablecoins are hot, distribution is still king. That said,

The GENIUS Act is the most consequential financial services regulation of the past two decades. It creates a genuine alternative to the FBO Account or MTL licenses for the US, and unlocks stablecoins as a legitimate payment rail for cross-border transactions. Your Rant this week is why I think this third way will be how domestic adoption starts.

I’ll be in Dubai next week, then in SF from August 18th through 29th. HMU if you'd like to say hello.

Oh, and look out for some extra credit in this week's newsletter, I’m trying to make it a shorter read, while letting the 10% of you who really go deep, go deep.

Want to support Fintech Brainfood? Get yourself to Fintech Nerdcon in Miami, or check out the work we do at Sardine*.

Weekly Rant 📣

Congress Accidentally Created a Federal Payments Charter

Why stablecoins are preferable to going state by state for MTL licences or FBO structures

For decades, fintech companies begged Congress for a federal payments charter. 

State regulators killed it every time.

Last month, Congress accidentally gave them something better.

We just lived through the most consequential change to financial services regulation in two decades or more with the passing of the GENIUS Act. The result will be the biggest shift in US domestic payments in a generation.

For the first time, we have a third way to regulate payments. The FBO account, the MTL, and now, stablecoins. This parallel financial system exists on top of, and around the existing one. Like the internet does over Telcos. 

The GENIUS Act wasn't designed to create a parallel financial system. 

But that's exactly what it did.

Today, there are two primary ways to move money in the United States as a nonbank

• Option 1: Partner with a bank to open an FBO account (For Benefit Of)

• Option 2: Get your own Money Transmission Licences (MTLs)

(For European Readers, the MTL roughly maps to EMI but without passporting. A lof the rationale I apply in this document for regulated stablecoin use cases apply)

First, the FBO: 

As a Fintech company or marketplace that stores and moves money on behalf of your customers, this route has low regulatory complexity and avoids having to go state-by-state for licences. The major drawback of an FBO account is that you rely heavily on the sponsor bank’s capabilities and risk appetite. The tradeoffs: 

• Faster time to market (months, not years)  ✅

• Lower cost to start (6 figures vs millions) ✅

• Compliance is largely ‘outsourced’ to the bank that sets risk appetite ✅

• Give up 20 to 50% of economics to partners ❌

• Dependent on partners, if they change risk appetite, you are S.O.L. ❌

• Permission required to do new things (like launch a new product) ❌

The MTL:

As a Fintech company who wants to monetize payments, introduce complex payments flows or set your own risk appetite, the MTL route, while more complex and expensive gives you that freedom. MTLs have been the best option for a nonbank to operate in payments in the United States. The tradeoffs

• Keep more of the economics  ✅

• Not as dependent on partners risk appetite  ✅

• Set your own risk appetite and permissions ✅

• Much slower to market (18 months to 2 years) ❌

• Much higher cost to set up and maintain ($1.5m to $2m). ❌

• Maintain internal (useful) but high-cost compliance team and overhead ❌

The drawback has always been the complexity. You have to apply for a licence in 49 states. That’s 49 applications, 49 annual audits, 49 different sets of regulations and rules to manage.

So you’re immediately wondering. Why has nobody ever made one federal MTL? Great question. The story of how many have tried and failed is fascinating, and shows why I think the GENIUS Act and stablecoins will provide a compelling alternative to FBOs and, potentially, even MTLs.

But here's what nobody realized when GENIUS passed. The regulatory community was so focused on controlling stablecoins yield, they accidentally legitimized the infrastructure for an entirely parallel financial system.

2. What the Genius Act says - The Third Way Made Possible

The GENIUS Act creates a new category of payments provider the “Permitted Payment Stablecoin Issuer (PPSI). This framework is not an extension of old rules to a new technology. It is a purpose-built regime designed to manage the specific risks and opportunities of programmable, blockchain-based payments.

It requires:

1. Strict Reserve and Redemption Requirements: A PPSI must back every outstanding stablecoin on a one-to-one basis with high-quality, liquid assets, primarily defined as U.S. currency, insured deposits, and short-term U.S. Treasury obligations.

2. Funds held in segregated accounts: Legally distinct from the issuer's operational funds, and cannot be pledged, loaned, or reused (rehypothecated) for any other purpose

3. A legal framework for reserve audits and redemption: Monthly, publicly available reserve reports attested to by a registered public accounting firm and must provide clear, legally enforceable rights for holders to redeem their stablecoins for fiat currency at par in a timely manner

4. Federal Supervision above $10bn: Any state-chartered issuer with more than $10 billion in outstanding stablecoins must transition to federal oversight, ensuring that systemically important players are subject to uniform federal supervision.

5. Federal Oversight and Interoperability: Grants clear supervisory authority to federal regulators (the Federal Reserve, OCC, and FDIC) and, critically for innovation, mandates that these regulators consult with the National Institute for Standards and Technology (NIST) to establish standards promoting compatibility and interoperability

(Fintech Nerd moment: As a practical matter, most stablecoin issuers (like Circle, Paxos, and even Tether) will likely get MTLs so they can mint stablecoins in return for fiat USD, or charters so they can get Fed Master account and Fedwire access.)

The MTL/FBO hasn’t gone away for the stablecoin issuer, but it has for the customer of the issuer. As a money mover, I can now work with stablecoin issuers and stablecoins as a genuine alternative.

This third way is a compelling new opportunity.

For the first time, we have a simple federal-level licensing structure for a type of money mover. The US has a storied and complex history with allowing nonbanks to move money. Understanding this is key to understanding why I think GENIUS will become preferable over time to the FBO structure or MTLs

This sounds theoretical. It's not. The parallel rails are already being built

3. The birth of a parallel payments ecosystem

This parallel payments ecosystem is backwardly compatible with the fiat world, in the same way WhatsApp and the Internet use Telcos. It’s all still there; we’re just not using it as often for the calls or SMS functionality. 

Today that looks like using stablecoin wallets as an intermediary step between other rails like ACH, card, or for cross-border. Tomorrow, more and more transaction volume will become onchain native. 

As separate worlds it looks like this:

• Custodian of value: Banks and stablecoin issuers are similar in that they both are on the hook to keep your money and value safe. If either fails, your money is technically at some level of risk.

• Moving value: Payments processors typically instruct card payments (sometimes ACH, wires, SEPA etc). Chains typically instruct those payments on-chain.

• Connecting the banks and payments ecosystem: BaaS infra (like Unit, Treasury Prime) does this in Tradfi, Stablecoin APIs like Bridge, BVNK, Conduit etc onchain. The nuance is those companies often connect back to Tradfi rails and banks.

• Unit of Account: The FBO Account at the bank keeps track of individual accounts (or the sub ledger in the case of an MTL). The wallet address keeps track of balances onchain.

• Card networks: Are card networks. They can pull funds directly from stablecoins, or through the banking system. 

This simplification masks a ton of complexity. But the point is to say, they’re parallel ecosystems with many of the same properties outwardly. 

The practical reality today is that these two parallel worlds need to co-exist. And that’s where we meet our stablecoin sandwich 🥪.

In this world, the wallet and stablecoin sit between rails, acting as an alternative to an FBO account or sub ledger. It can connect back to the existing banking system, but it can also transact onchain. Meaning that a wallet can now move money cross-border just as easily as it does domestically.

When two financial systems run parallel, the more efficient one eventually wins. Email replaced fax. WhatsApp replaced SMS. The question isn't whether this will happen - it's how fast and where first?

In 2005 to 2015, Skype and Blackberry Messenger existed in this weird, in-between era, where iMessage and WhatsApp hadn’t taken off and video calls weren’t the default. We could be in that phase for stablecoins for a while yet. 

So what changes that?

I think we've seen hybrids for a while, like the stablecoin sandwich or the stablecoin-backed account.

The infrastructure exists. The regulation exists. Now let's talk about how companies access it.

4. Meet the Stablecoin Backed Account (SBA).

By creating a new, specific license just for stablecoin issuance, Congress has effectively designed a de facto federal payments charter. Some companies are already adapting and offering Stablecoin Backed Accounts (SBAs) as a third way alternative to the FBO or MTL structure.

In this model, a USDC wallet plays the role of an FBO account. The difference is, 

• It’s faster and cheaper to set up than an FBO account ✅

• It’s less complex than the FBO or MTL to manage ✅✅

• Brale (the provider of stablecoin wallets) also holds MTLs, so there’s no loss of control. ✅✅

• Every client can have their own wallet, rather than it being one large account that the bank has to reconcile. ✅✅

• Reconciliation of ledgers comes out of the box; that’s what blockchains do. ✅✅

• And there’s the added benefit of 24/7 instant movement of funds between company offices offshore ✅

This flow of funds diagram describes it nicely.

Some people call this type of flow of funds the “stablecoin sandwich” because they go:

Fiat in (USD e.g., card or wire) → stablecoin (USDC on chain) → fiat out (USD e.g. ACH)

As a nonbank payments company (like a marketplace, for example), this means you potentially avoid the FBO setup with a bank partner, or having to get an MTL.The practical reality for any Fintech company will likely be to operate at scale; they’re going to want their own MTLs to get better economics on their wires and ACH fees. 

Today, stablecoins aren’t really a Federal MTL because non of the issuers and partners (like Brale) can offer the kinds of economies of scale a Fintech company would need. They’re more of an alternative to the FBO.

But my hypothesis is that over time, ever more payments activity will migrate onchain. As that happens, we’ll spend less time concerned with connecting back to the fiat universe, and more and more assets, dollars and payments will be onchain native.

The practical mechanism is clear. But why will adoption become inevitable? The economics are too compelling to ignore

5. The economics of a parallel ecosystem

I think there are 5 primary drivers of economic value:

The US companies will begin by adopting the lower-cost cross-border rail for exotics:

• Access exotic currencies at lower cost. Contractor payouts (Deel), global treasury (Space X, DLocal), pay ins (Shopify, ChatGPT, etc).

My prediction is the next major adoption curve is the US domestic stablecoin sandwich: 

• Faster time to market and lower up-front cost for money movers. In the US, the FBO structures and MTLs are either expensive or limiting. Stablecoin-backed accounts create a new, low-cost entry route for nonbanks.

Walmart, Sony, and Amazon announcing or investigating issuing their own stablecoin can be seen cynically as a headline grab. But I think the calculus is simple.

• Issue your own stablecoin = collect the US treasury yield for yourself. If you have a meaningful closed loop or internal cash operations, why not store that in your own stablecoin?

Then there’s folks creating their own blockchains like Robinhood or Coinbase. Which at first seems anathma to the whole idea of blockchains. But the reality is the opposite.

• Have your own blockchain = collect the onchain fees yourself. If you have large distribution why pay that to a 3rd party network, especially if like base or Robinhood’s new L2, they are Ethereum compatible. 

Finally, as more big companies issue their own stablecoin, create their own blockchain, and, most likely, adopt what’s already there, we begin to get a network effect.

• Network effects drive adoption of stablecoins as a new default. Just as whatsapp and video calls replaced the conference call number, the combined economic benefits of 

These 5 effects will compound into a flywheel of onchain adoption for payments. As more consumer and business adoption arrives, more payment flows (e.g. consumer, or B2B) will become better with a stablecoin. (Stablecoins aren’t always cheaper; they are better).

There’s unlimited space for innovation in loyalty, risk management, we’re just getting started with what’s possible now we have a regulatory framework. 

And remember, these are just the payments use cases. There’s capital markets, vertical industries (e.g. energy, transport), and a whole hidden economy beyond consumer commerce to be disrupted.

If you’re a VC, builder, or bank, the regulatory framework is your opportunity to experiment and see where adoption comes fastest.

The regulatory framework is live. 

The infrastructure is building. 

The economics are inevitable. 

The only question is whether you'll be building on the parallel system or watching from the old one.

ST.

🤓 EXTRA CREDIT: I wrote about 900 words on the History of the MTL, the drawbacks of FBO accounts, and the risks of stablecoins. If you’re not already exhausted from Fintech newsletter sunday, go ahead, give it a little click, only for the real nerds. 

4 Fintech Companies 💸

1. Alix - Making the horrible work estate settlement a bit easier

Alix helps families settle the estate of a loved one who has recently passed away as a service. They’ll find and cancel subscriptions, define any unhandled tax obligations or debts, take control of accounts and transfer titles or deeds to property. 

🧠This is an ideal use case for AI. Lot’s of paperwork, lots of hidden pain. The founder built Alix after spending 900 hours trying to settle a family friend’s estate, which included hours on hold with utility companies, chasing death certificates, and trying to understand legal forms that made no sense. In that process, she found a broken system that AI is well suited to address.

2. Pay Per Cut - BNPL Aggregator for Europe

Pay per cut allows businesses to offer BNPL at checkout and will recommend the best provider based on regional variations, customer segments and business model. At checkout a request for BNPL is then sent to all providers, and whomever provides the best offer, wins.

🧠 Europe’s payments and banking market is highly fragmented. BNPL was ripe for aggregation, but using regional variation (and therefore expansion) as a wedge is smart. I wonder if we’ll see more of this or if the big BNPL players will push back from being commoditized. 

3. Spiko - T Bills for European Businesses 

Spiko allows European businesses to setup accounts in < 5 minutes, and quickly access rates of up to 4.13% on USD (or 1.77% on Euro). They have more than €342m deposited to the platform to date, and have paid more than €4.6m in interest.

🧠 Yield optimization is a category that appeared after rate rises. If rate cuts start to become more of a trend in the US, I wonder what they’ll pivot to next? If your entire go to market is defined by the rate you can offer, maybe you’ll have to move into riskier products. Or do your sales go down entirely? Europe has no equivalent to a T Bill, because it does not mutualize its debt. There are gnarly political issues preventing that, but imagine the demand if it did. Europe worries a lot about sovereignty. The single biggest thing it could do for that would be mutualized debt.

4. Yetipay - Responsive, low-fee payments for SMBs (UK)

Yetipay offers modern, responsive payment terminals, a simple pricing structure but combines this with low fees compared to many modern market entrants. They offer on-demand support and next day replacement for broken terminals. SMBs can take payments on their phone (mPOS), via payment links, and card not present (phone and ecommerce). 

🧠 The market leaders make you choose, high fees and good UX, or low fees and bad UX. Yeti says why not have both. The problem with this, is it makes them a low margin business, which impacts how much they can spend on advertising. So how do they get to growth?

Things to know 👀

1. PayPal adds support for UPI and Chinese Wallets

PayPal announced PayPal World, a new payments platform partnering with Mercardo Pago, UPI, China’s Tenpay, and Weixin with PayPal and Venmo. The deal connects 2 billion end customers, and lets them use each other's merchants, domestic payment rails, and remittances directly. 

🧠PayPal merchants just got access to more customers. I still see PayPal primarily as a merchant services business (even if it doesn’t). If you’re a PayPal customer, access to these new brands is meaningful. 

🧠PayPal has the potential to be a major player in cross-border payments. The Venmo → UPI remittance corridor could be substantial by itself. How many of the Indian diaspora live in the US and struggle to go from their account directly to UPI? Or use UPI when they go home. Companies like Wise can already do this, but they don’t have the same user base as Venmo in the US.

🧠The power of bi-lateral deals in payments is still significant. In the age of stablecoins this is a timely reminder that distribution matters. I don’t think this is anti-stablecoin (if anything, I still think stablecoins are a platform), but it is a shift in focus.

🧠Is this their fix for PayPal / Venmo integration? Lol. Seriously though, on merit, this is a fantastic achievement of aligning brands into a single press release. I’ll be fascinated to see if this gets traction and adoption.

🧠PayPal seems to be throwing everything at the wall. Everything but fixing Braintree. We haven’t heard much about PYUSD lately. Remember PayPal rewards? BNPL? Their data business. It’s adding silo, not integration. Yet the e-commerce business is hyper-competitive, with Stripe and Adyen crushing. 

2. Fiserv Shares down bad after Clover growth stalls.

Fiserv stock is on track for its worst year since 2008 driven by analyst concerns over their Clover merchant acceptance business. It traded down 17% on Wednesday, and follows an 18% drop back in April. Organic growth was 9%, below the expected 11% and down from the year-earlier period. Their profitability on payment volume is also declining.

🧠The SMB acceptance space is hyper-competitive. Block, Toast, Shift4 and others are aggressive and have strong solutions.

🧠There’s a capped upside to acquiring your way to growth. Clover was a great product and Fiserv had existing customers they could cross sell to. Have they exhausted that? Have they struggled with market entry (where Shift 4 is doing quite well), or moving upmarket like Toast?

Want more? Here’s some of my LinkedIn activity from this week: 

• My thoughts on PNC adding Crypto buy / sell / hold.

• Western Union Exploring Stablecoins

• Sam Altman said the quiet part out loud: KYC is screwed.

Good Reads 📚

1. Big Bang 2.0 - The Tokenization of Everything

The invention of Ethereum was designed to make every transaction programmable, and create a universal, shared settlement layer for all trade and assets. The problem was, it was slow, it was in a legal grey area. In 2025 the picture is different, Ethereum ETFs are seeing record inflows, Blackrock’s CEO believes every asset will be Tokenized. Blackrock is Tokenizing money market funds, Robinhood, stocks. Why?

MMFs that pay out over weekends, US stocks that are available in long tail markets. But these are just early advantages. In the 1960s all trades required a paper certificate to change. In the 1970s we “immobilized” these certificates, and stored them at a centralized depository (like, say, the DTCC), then we could trade them electronically. 

🧠Tokenization is to digital assets, what “immobilization” was to digitization. At first, not much more efficient, but over time, essential to unlocking new use cases.

📚Bonus: Ron also wrote a great piece on Grok going off the rails and the perils of AI in financial services.

Tweets of the week 🕊

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

Want more? I also run the Tokenized podcast and newsletter.

(1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees.

(2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

(5) Citations may be missing, and I’ve done my best to cite, but I will always aim to update and correct the live version where possible. If I cited you and got the referencing wrong, please reach out