The Community Reinvestment Act Gets an Internet Update

Good morning, and welcome to Protocol Fintech. This Monday: Rethinking the Community Reinvestment Act, Stripe vs. Plaid and the earnings to watch, including Coinbase and Marqeta.

Off the chain

The strangest investor in Elon Musk’s pray for Twitter maybe Binance† Sure, Twitter has been toil with crypto tips and payouts, but it seems far removed from Binance’s core business. Does Binance simply have more money than it knows what to do with it? I am reminded of his recent investment in Forbes† Maybe we should be concerned if the decentralized company starts buying up real estate.

Also some news about our team! VeronicaIrwin has joined Protocol Fintech. She will contribute to the newsletter, write about fintech and a bit of VC, and oversee our weekly ‘Dealflow’ section. Enjoy her look at the Community Reinvestment Act in today’s edition.

— Owen Thomas (e-mailtwitter

An aging law gets an internet overhaul

Since 1995, the internet, smartphones and even social media have revolutionized the way we save, spend and invest. That’s also the year the Community Reinvestment Act, which is intended to encourage fair lending to low- and middle-income communities and was first passed in 1977, was last updated. Finance looks very different these days.

The OCC, Federal Reserve and FDIC have a joint proposal Thursday for revising the law, which was structured around the idea of ​​branch banks, to take into account new realities such as mobile and internet banking. People are already starting to wonder how this will affect the neo-banks — and the small banks that have thriving businesses serving them.

The CRA has been a fraught issue for decades. Critics say it limits financial institutions without producing the promised equity, while supporters say it is essential to ensure that all Americans can generate wealth over time.

  • The law primarily targets redlining, or the systemic denial of financial services to people of color and low-income households. Most often, the term “redlining” is used in the context of home mortgages.
  • Some banks and academics say the law requires banks to engage in risky lending practices† Under the Trump administration, the OCC has unilaterally changed its rules to make banks eligible for the CRA by investing in broad community initiatives such as road and bridge construction projects, but the agency repealed those rules in early 2021 before they came into effect.
  • Some studies show the CRA reduced economic and racial residential segregation in US cities, while others suggest it is a vehicle for gentrification

The OCC tried to go it alone, but now agencies are showing a coordinated front to impose CRA regulation on neobanks and fintechs. CRA as it stands now regulates banks based on where their physical branches are located, which doesn’t make much sense in the internet age.

  • 34% of people used their phone as their primary method of accessing financial services in 2019, according to the FDICwhile another 22.8% mainly used the computer.
  • Since late last year, the OCC has approved fintechs to pursue national banking charters, while companies like and LendingClub allow people to apply for mortgages online. Block, SoFi and LendingClub are among the fintechs that have added banking charters, bringing them directly under the CRA, rather than relying on banking partners for compliance.
  • Whether these companies are required to comply with the CRA has been a legal gray area, with many fintechs saying that, like credit unions, they already serves low- and middle-income households. Most follow the requirements for ‘strategic plans’, which are vague and which critics say: allow them to set their own stats for success.
  • Block have a bank charter for an industrial credit company. Critics recently called the FDIC revised CRA compliance rules insufficient for industrial loan companies, as they only needed loans at the ILC headquarters. That’s just one example of the ways CRA rules don’t fit well with the modern way financial firms operate.
  • The proposal suggests that lenders should be given more supervision, especially in the case of car loans. Previously, the focus was mainly on mortgages and loans for small businesses.
  • The reforms promise to prioritize small, high-impact loans, with clear definitions of other potential programs. Richard Hunt, president and CEO of the Consumer Bankers Association, said he appreciated the proposal provided more “clarity” in a statement

It’s still early, but some people are starting to weigh in. Fellow regulators support the proposal (no shock there), while some think tanks and fintechs are concerned that added regulation would either be too restrictive or encourage risky lending.

  • Rohit Chopra, director of the Consumer Financial Protection Bureau, thinks it’s common sense. “Banks get all kinds of benefits from the public. In return, they are obligated to adequately meet the banking and credit needs of their communities,” he said in a statement. tweet
  • But others are not so happy. “The Community Reinvestment Act for independent mortgage bankers is nonsensical and a solution to a problem,” said Robert Broeksmit, CEO of the Mortgage Bankers Association. Wall Street Journal
  • Fintech analyst Alex Johnson points out that banks with less than $10 million in assets, including many of the banks fintechs work with, may be exempt from the CRA updates. “I would like to see a revised CRA that requires banks that provide banking-as-a-service to fintech firms to report on how those fintech firms’ operations support CRA objectives,” he said.
  • It’s also safe to assume that conservative policy analysts will continue to worry about banks giving people loans that customers simply can’t afford in the name of compliance. “Empirical research also shows that banks’ risk-taking is increasing ahead of their CRA reviews,” reads a Report Cato Institute 2019

Whatever the outcome, it looks like the country’s main banking regulators will exert greater control over a part of the industry that has hitherto been largely free-roaming. The agencies will accept comments on the proposal until August 5.

Veronica Irwin (e-mailtwitter


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on the money

The CEO of Mining Capital Coin was charged with a $62 million crypto fraud scheme. Luiz Capuci Jr. Reportedly misled investors, and investor funds fell instead of mining crypto as promised.

Argentina’s central bank banned banks from offering crypto services. the central bank said that banks cannot provide services for unregulated assets, and since digital assets in the country are unregulated, that includes crypto.

OpenSea’s Discord has been hacked, with hackers promoting a fake project. the attackers sent links on the Discord servers pointing to an NFT mining project, which in reality led to a phishing site. Less than 10 wallets were compromised and all stolen NFTs were valued below 10 ether.

Robinhood has added two Grayscale crypto trusts. Users of the app can now buy and sell Grayscale Bitcoin Trust and Grayscale Ethereum Trust, a move by Robinhood to further establish itself in the crypto world.

A very special Overheard with Zach Perret

The Stripe against Plaid Fintech feud may have been short-lived, but juicy it sure was. After Stripe Financial Connections launched on Wednesday, it will provide direct competition for Plaid’s core product, Plaid CEO Zach Perret accused Stripe’s Jay Shah of using meetings and interviews with Plaid to help build the new tool.

Of course, Bolt co-founder Ryan Breslow (of “Stripe is the mafia of Silicon Valley” fame) couldn’t help but dial in. “I’m sorry this happened to you Zach. Thanks for speaking out. Stripe does this because they can; most are too scared to cry out. But the tide is turning.” he tweeted

Breslow may have tweeted too soon. Perret deleted his original tweet, saying it may have been all just crazy confusion! Tweet deleted. Misunderstanding or other styles maybe. Assuming positive intent,” he tweeted† (That’s exactly what you’d say if a real mob threatened you. Blink twice if this is a hostage situation, Zach.)

Stripe CEO Patrick Collison sent an internal email noting that Shah had an interview with Plaid before working for Stripe, only meeting Plaid at Perret’s request.

“We definitely need to be open to the possibility that we could have handled things better… We will try to learn what we can by reaching out to the folks at Plaid and will be retro this week,” Collison said in The e-mail


Coinbase’s earnings call is scheduled for Tuesday. COINS average estimated WPA stands at $0.17, down 95% from the previous quarter.

Marqeta’s earnings call is on Wednesday. MQs average estimated WPA stands at -$0.09, down 29% from last quarter.

Thursday is the Fintech Talents North America conference. The conference with speakers from Revolut, JP Morgan, Marqeta and others. Marqeta is also the main sponsor of the event.

Affirm’s earnings call is scheduled for Thursday. AFRMs average estimated WPA is at -$0.54, about 5% higher than in the previous quarter.

A hearing in the US House on the use of AI for regtech will take place Friday. The US House Committee on Financial Services will: discuss the utility of artificial intelligence for effective automated regulation.

Nubank’s earnings call is scheduled for next Monday, May 16. NOWs average estimated WPA is at -$0.01, a 200% drop from average estimated earnings per share for the past quarter.

The Payments Forum conference also starts next Monday. The three-day conference in Phoenix, Arizona, will be speakers from Visa, Mastercard, Walmart, Santander Bank, and others.


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Thanks for reading – see you tomorrow!

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