Japanese Ministry of Finance Info, July 2024

[from the Ministry of Finance, Japan]

Interest Rates (July 17, 2024)

Date1Y2Y3Y4Y5Y6Y7Y8Y9Y10Y15Y20Y25Y3oY40Y
7/10.1750.360.390.4920.6150.6620.7620.8620.9621.0831.5491.8732.0582.1632.351
7/20.1760.3650.4010.5080.630.6790.7860.890.9851.1041.5731.8942.0752.1742.352
7/30.1660.350.3910.4930.6130.6640.7780.8860.9841.11.5791.9082.0882.1852.364
7/40.1480.340.3820.4820.5990.6450.7540.8630.9671.0861.5711.9082.0922.1882.364
7/50.1480.3460.3820.4830.5980.6350.7450.850.9581.0721.5661.9022.0982.22.379
7/80.150.3620.3980.4990.6160.6550.7640.8690.9741.0921.5761.9072.0992.22.385
7/90.140.3530.3910.4840.610.640.7480.8560.961.0791.5731.9112.1032.2052.398
7/100.1310.3430.3870.480.6050.6490.7560.8650.9691.0931.5861.9242.1152.222.415
7/110.1310.3430.3920.4850.6110.6540.7560.8640.9691.0891.5851.9122.1122.2212.419
7/120.1220.3330.3780.470.5860.6240.7230.8310.9361.0551.5391.8732.0732.1772.387
7/160.1110.320.3630.4560.5660.6060.7050.8090.9141.0321.5241.862.0612.1682.375
7/170.1150.330.3740.4670.5770.620.720.8240.9241.0421.5281.8612.0552.1732.376
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Announcement of 40-year Japanese Government Bonds to Be Issued in July 2024

[Provisional Translation]

July 17, 2024

Ministry of Finance

  1. Auction Date: July 24, 2024
  2. Issue Date: July 25, 2024
  3. Maturity Date: March 20, 2064
  4. Offering Amount: About 700 billion yen

* 40-year Japanese Government Bonds to be issued in July will be a reopening issue of the May 2024 issue. The auction method is Dutch-style-yield-competitive auction at intervals of 0.5bp.

JGB Monthly Newsletter (July 2024)

Read the full newsletter (in English) [archived PDF]

Education and the Triple Helix underneath It

We want to restate the basic instinct and intuitions of this education or re-education project.

To get at the “schema” it will help you if you digress for a second and absorb this writeup of Professor Richard Lewontin’s (Harvard biology) 2002 masterpiece, The Triple Helix: Gene, Organism and Environment.

The blurb from Harvard University Press tells us:

“One of our most brilliant evolutionary biologists, Richard Lewontin has also been a leading critic of those—scientists and non-scientists alike—who would misuse the science to which he has contributed so much. In The Triple Helix, Lewontin the scientist and Lewontin the critic come together to provide a concise, accessible account of what his work has taught him about biology and about its relevance to human affairs. In the process, he exposes some of the common and troubling misconceptions that misdirect and stall our understanding of biology and evolution.

The central message of this book is that we will never fully understand living things if we continue to think of genes, organisms, and environments as separate entities, each with its distinct role to play in the history and operation of organic processes. Here Lewontin shows that an organism is a unique consequence of both genes and environment, of both internal and external features. Rejecting the notion that genes determine the organism, which then adapts to the environment, he explains that organisms, influenced in their development by their circumstances, in turn create, modify, and choose the environment in which they live.

The Triple Helix is vintage Lewontin: brilliant, eloquent, passionate and deeply critical. But it is neither a manifesto for a radical new methodology nor a brief for a new theory. It is instead a primer on the complexity of biological processes, a reminder to all of us that living things are never as simple as they may seem.”

Borrow from Lewontin the idea of a “triple helix” and apply it to the ultimate wide-angle view of this process of understanding. The educational triple helix includes and always tries to coordinate:

  1. The student and their life (i.e., every student is first of all a person who is playing the role of a student). Every person is born, lives, and dies.
  2. The student and their field are related to the rest of the campus. (William James: all knowledge is relational.)
  3. The student and the world. (Container ships from Kaohsiung, Taiwan are bringing Lenovo and Acer computers to Bakersfield, California in a world of techno-commerce, exchange rates, insurance, customs, contractual arrangements, etc. In other words, always with some sense of the global political economy.)

The student keeps the triple helix “running” in the back of the mind and tries to create a “notebook of composite sketches” of the world and its workings and oneself and this develops through a life as a kind of portable “homemade” university which stays alive and current and vibrant long after one has forgotten the mean value theorem and the names and sequence for the six wives of Henry VIII).

The reader should think of Emerson’s point from his Journals of Ralph Waldo Emerson: 1824–1832—“The things taught in schools and colleges are not an education, but the means to an education.”

“De-Globalization?”

The classic study of the “swirl of processes and events” that ended previous globalization episodes is the theme of Princeton Professor Harold James’ 2002 book, The End of Globalization: Lessons from the Great Depression.

Globalization” is here. Signified by an increasingly close economic interconnection that has led to profound political and social change worldwide, the process seems irreversible. In this book, however, Harold James provides a sobering historical perspective, exploring the circumstances in which the globally integrated world of an earlier era broke down under the pressure of unexpected events.

James examines one of the great historical nightmares of the twentieth century: the collapse of globalism in the Great Depression. Analyzing this collapse in terms of three main components of global economicscapital flows, trade and international migrationJames argues that it was not simply a consequence of the strains of World War I, but resulted from the interplay of resentments against all these elements of mobility, as well as from the policies and institutions designed to assuage the threats of globalism.

Could it happen again? There are significant parallels today: highly integrated systems are inherently vulnerable to collapse, and world financial markets are vulnerable and unstable.

While James does not foresee another Great Depression, his book provides a cautionary tale in which institutions meant to save the world from the consequences of globalization—think WTO and IMF, in our own time—ended by destroying both prosperity and peace.

Legitimate fears about “globalization reversal” have been well put by Zakaria:

Davos, Switzerland

President Trump’s speech here at the World Economic Forum went over relatively well. That’s partly because Davos is a conclave of business executives, and they like Trump’s pro-business message. But mostly, the president’s reception was a testament to the fact that he and what he represents are no longer unusual or exceptional. Look around the world and you will see: Trump and Trumpism have become normalized.

Davos was once the place where countries clamored to demonstrate their commitment to opening up their economies and societies. After all, these forces were producing global growth and lifting hundreds of millions out of poverty. Every year, a different nation would become the star of the forum, usually with a celebrated finance minister who was seen as the architect of a boom. The United States was the most energetic promoter of these twin ideas of economic openness and political freedom.

Today, Davos feels very different. Despite the fact that, throughout the world, growth remains solid and countries are moving ahead, the tenor of the times has changed. Where globalization was once the main topic, today it is the populist backlash to it. Where once there was a firm conviction about the way of the future, today there is uncertainty and unease.

This is not simply atmospherics and rhetoric. Ruchir Sharma of Morgan Stanley Investment Management points out that since 2008, we have entered a phase of “deglobalization.” Global trade, which rose almost uninterruptedly since the 1970s, has stagnated, while capital flows have fallen. Net migration flows from poor countries to rich ones have also dropped. In 2018, net migration to the United States hit its lowest point in a decade.

The shift in approach can best be seen in the case of India. In 2018, Prime Minister Narendra Modi came to Davos to decry the fact that “many countries are becoming inward focused and globalization is shrinking.” Since then, his government has increased tariffs on hundreds of items and taken steps to shield India’s farmers, shopkeepers, digital companies and many others from the dangers of international competition. The Office of the U.S. Trade Representative recently called out India for having the highest tariffs of any major economy in the world.

Indian officials used to aggressively court foreign investment, which was much needed to spur growth. Last week, with India’s economy slowing badly, Jeff Bezos announced a $1 billion investment in the country. (Bezos owns The Post.) But the minister of commerce and industry scoffed at the move, saying Amazon wasn’t “doing a great favor to India” and besides was probably engaging in anti-competitive, “predatory” practices. Often, protectionist policies help favored local producers. Malaysian Prime Minister Mahathir Mohamad recently criticized some of Modi’s policies toward Muslims. The Indian government effectively cut off imports of Malaysian palm oil. In a familiar pattern, one of the chief beneficiaries was a local billionaire long associated with Modi.

The Economist notes that Europe, once one of the chief motors for openness in economics and politics, is also rediscovering state intervention to prop up domestic industries. And if you think the Internet is exempt from these tendencies, think again. The European Center for International Political Economy tracks the number of protectionist measures put in place to “localize” the digital economy in 64 countries. It has been surging for years, especially since 2008.

It’s important not to exaggerate the backlash to globalization.

As a 2019 report by DHL demonstrates, globalization is still strong and, by some measures, continues to expand. People still want to trade, travel and transact across the world. But in government policy, where economic logic once trumped politics, today it is often the reverse. Economist Nouriel Roubini argues that the cumulative result of all these measures — protecting local industries, subsidizing national champions, restricting immigration — is to sap growth. “It means slower growth, fewer jobs, less efficient economies,” he told me recently. We’ve seen it happen many times in the past, not least in India, which suffered decades of stagnation as a result of protectionist policies, and we will see the impact in years to come.

Nevertheless, today, nationalism and protectionism prevail.

This phase of deglobalization is being steered from the top. The world’s leading nations are, as always, the agenda-setters. The example of China, which has shielded some of its markets and still grown rapidly, has made a deep impression on much of the world. Probably deeper still is the example of the planet’s greatest champion of liberty and openness, the United States, which now has a president who calls for managed trade, more limited immigration and protectionist measures. At Davos, Trump invited every nation to follow his example. More and more are complying.

The world is de-globalizing. Trump set the example.The Washington Post, Fareed Zakaria

Students should sense that while history does not repeat itself, it sometimes rhymes and this is a major danger. It also might imply that coping with climate change will be all the harder because American-led unilateralism everywhere would mean world policy paralysis.

Economics-Watching: Does Monetary Policy Affect Non-Mining Business Investment in Australia?

[from the Reserve Bank of Australia, by Gulnara Nolan, Jonathan Hambur and Philip Vermeulen]

Summary

Business investment is a key driver of economic growth. When investment is strong, workers have access to more capital and equipment, making them more productive and able to contribute to stronger productivity growth. Business investment is also thought to be an important driver of economic cycles and stimulating business investment is one of the key mechanisms through which monetary policy is thought to work.

However, non-mining business investment in Australia was fairly weak over much of the 2010s, despite declines in interest rates and moderate economic growth. While several explanations have been put forward, one potential explanation is that monetary policy is not very effective at stimulating business investment or has become less effective over time.

This study examines the effect of monetary policy changes on non-mining business investment using a variety of national and firm-level investment data, exploring both the aggregate effect of monetary policy and the channels through which monetary policy affects investment.

Abstract

We provide new evidence on the effect of monetary policy on investment in Australia using firm-level data. We find that contractionary monetary policy makes firms less likely to invest and lowers the amount they invest if they do so. The effects are similar for young and old firms, indicating that the decline in the number of young firms in Australia over time is unlikely to have weakened the effect of monetary policy. The effects are also broadly similar for smaller and larger firms. This suggests that evidence that some, particularly large, firms have sticky hurdle rates does not mean that they do not respond to monetary policy. It also suggests that overseas findings that expansionary monetary policy lessens competition by supporting the largest firms likely do not apply to Australia. We find evidence that financially constrained firms, and sectors that are more dependent on external finance, are more responsive to monetary policy, highlighting the important role of cash flow and financing constraints in the transmission of monetary policy. Finally, we find evidence that monetary policy affects firms’ actual and expected investment contemporaneously, suggesting that expectations are reactive and will tend to lag over the cycle.

Read the full paper [archived PDF].

Economics-Watching: FTC Returns More than $3 Million to Businesses that Paid for HomeAdvisor Memberships, Announces Claims Process for Additional Refunds

Agency charged that the company deceptively marketed home improvement project leads

[from the Federal Trade Commission]

The Federal Trade Commission is sending more than $3 million in refunds to businesses that paid for memberships to HomeAdvisor, Inc., a company affiliated with Angi (formerly known as Angie’s List). The agency is also sending claim forms to businesses that are eligible for additional refunds.

The refunds stem from FTC allegations that HomeAdvisor used deceptive marketing tactics when selling home improvement project leads to service providers, including small businesses operating in the “gig” economy. The FTC’s March 2022 complaint alleged that since at least mid-2014, HomeAdvisor made false, misleading, or unsubstantiated claims about the quality and source of the leads it was selling to home service providers in search of potential customers. The agency also charged that HomeAdvisor told businesses that their annual membership would include one free month of mHelpDesk, an optional scheduling and payment processing service marketed by HomeAdvisor, but in reality, the company charged an additional $59.99 for the first month.

The FTC is sending 110,372 checks to eligible home service providers. These refunds are related to the FTC’s allegations that HomeAdvisor misled businesses about the quality of customer leads they would get with their membership. Recipients should cash their checks within 90 days, as indicated on the check.

The agency is also sending 91,273 claims forms to businesses that paid for mHelpDesk. The deadline to submit a claim is February 26, 2024. More information about the refund process is available at ftc.gov/HomeAdvisor or by calling the refund administrator, Rust Consulting, Inc., at 1-833-915-1144. The Commission never requires people to pay money or provide account information to get a refund.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.

Science-Watching: New Insights into Polyamorphism Could Influence How Drugs Are Formulated

[from the Royal Society of Chemistry’s Chemistry World, by Patrick de Jongh]

Results from a study combining experiments and simulations could overturn the assumption that amorphous forms of the same compound have the same molecular arrangement. The team behind the work claims to have prepared three amorphous forms of the diuretic drug hydrochlorothiazide and determined that they have distinct properties and distinct types of disorder. ‘If polyamorphism is proved in the future to be a universal—or at least not a very rare—phenomenon, then the pharmaceutical industry will need to make screens for polyamorphism and this will also be an opportunity for patenting,’ comments Inês Martins, from the University of Copenhagen in Denmark, who led the work with Thomas Rades.

Crystalline active pharmaceutical ingredients (APIs) often suffer from poor solubility. A common strategy to circumvent this problem is converting APIs into their amorphous form. This has been demonstrated for various APIs, including hydrochlorothiazide. However, the physical properties of polyamorphs are dependent on how they were prepared. Given there are no straightforward techniques to study how molecules interact and organise themselves in amorphous materials, the area is poorly understood.

Nevertheless, a team surrounding Rades and Martins set out to identify how amorphous forms of the same API, presenting different physicochemical properties, differ from each other. They decided to study hydrochlorothiazide as it was previously shown to have polyamorphs with glass transition temperatures above room temperature, which facilitates the preparation, isolation and analysis of its different polyamorphs. Starting from crystalline hydrochlorothiazide, they produced three polyamorphs: polyamorph I via spray-drying, polyamorph II via quench-cooling and polyamorph III by ball-milling. Thermal analysis revealed a significantly lower glass-transition temperature for polyamorph I (88.7°C), whereas polyamorphs II and III had similar glass-transition temperatures (117.5°C and 119.7°C, respectively). The polyamorphs also demonstrated very different shelf-life stabilities against crystallisation.

Subsequently, they studied polyamorphic interconversions by submitting the polyamorphs to the preparation conditions used for other polyamorphs. For example, polyamorph I (obtained by spray-drying) was subjected to quench–cooling or ball-milling. Identifying temperature as a critical parameter, they observed that polyamorph II could be obtained from polyamorphs I and III, but the reverse pathway was not possible. Meanwhile, they observed polyamorph I and polyamorph III interconvert. These results demonstrate polyamorph II is the most stable amorphous form.

Source: © Thomas Rades/University of Copenhagen
Researchers used a variety of techniques to elucidate the different polyamorphs that can be produced from crystalline hydrochlorothiazide and the polyamorphic interconversions that occur when a specific amorphous form is submitted to temperature or milling treatments

‘The problem out of the gate with polyamorphism as a concept is how to tell the difference between a well-defined metastable amorphous structure and an unrelaxed one that simply results from kinetically trapped defects introduced during processing. This is hard to define since the amorphous structure is statistical in any case,’ comments Simon Billinge, who studies the structure of disordered materials at Columbia University in the US. ‘They process the samples very differently. We know—from our own work—that this results in amorphous phases with very different stabilities against recrystallisation, for example, but is this polyamorphism? On the other hand, they find that the pair distribution functions of each of their “forms” are identical. There is no experimental evidence for a distinct structure. Taken together, the results do little to advance my understanding of polyamorphism.’

Distinct dihedral angle distributions

To get further information on how the polyamorphs are different on a molecular level, Martins and Rades turned to molecular dynamics simulations, comparing the dihedral angles around the sulfonamide groups in polyamorphs I and II. ‘Polyamorph I, which has a large number of the molecules with a dihedral angle similar to the one reported for crystalline hydrochlorothiazide, has a lower physical stability and faster structural relaxation time than polyamorph II, which has a broader dihedral angle distribution. Our findings indicate that a broader dihedral angle distribution seems to contribute to a better physical stability and slower structural relaxation,’ says Martins. They therefore hypothesise that having half the molecules with a conformation closer to crystalline hydrochlorothiazide and half of the molecules with a different conformation could help in establishing specific molecular arrangements that would favour the stability of the amorphous form.

The team also says the simulations corroborated its experimental results that polyamorph I can transform into polyamorph II, while the opposite conversion did not take place.

However, Billinge does not believe the computational studies provide conclusive evidence: ‘There is a detailed molecular dynamics analysis where different annealing conditions in the simulations give some slightly different statistics on the molecular conformations, but despite their claim, the resulting computed pair distribution functions do not look like the measured ones, so we have no way of knowing if the molecular dynamics is capturing what is happening in the real material. For amorphous materials, it is very difficult to equilibrate them in a molecular dynamics simulation, so you will be looking at artefacts of how the ensemble was created. Any claims to have found polyamorphism from molecular dynamics simulations by themselves are therefore questionable.’

Rades says their results can change the field of pharmaceutics: ‘We expect that other drug molecules may exhibit polyamorphism and the question would be which structural parameters would be different. In the case of hydrochlorothiazide, the dihedral angle distribution was found to be a parameter contributing for the formation of different polyamorphs. In other drugs, maybe the dihedral angle distribution (molecular conformations) could be different as well, but also maybe the type of intermolecular interactions can play a more important role in the formation of polyamorphs.’

The team now hope the pharmaceutical industry will look at amorphous systems differently and not assume that all amorphous forms of the same compound are the same. ‘Knowing this and considering that a certain polyamorph will have better physical stability, solubility or dissolution properties than another polyamorph, this will be an opportunity for the pharmaceutical industry to prepare tablets of a drug where the dose could be lower than tablets containing the crystalline form,’ concludes Rades.

Economics-Watching: Fed Transparency and Policy Expectation Errors: A Text Analysis Approach

[from the Federal Reserve Bank of New York, written by Eric Fischer, Rebecca McCaughrin, Saketh Prazad, and Mark Vandergon]

This paper seeks to estimate the extent to which market-implied policy expectations could be improved with further information disclosure from the FOMC. Using text analysis methods based on large language models, we show that if FOMC meeting materials with five-year lagged release dates—like meeting transcripts and Tealbooks—were accessible to the public in real-time, market policy expectations could substantially improve forecasting accuracy. Most of this improvement occurs during easing cycles. For instance, at the six-month forecasting horizon, the market could have predicted as much as 125 basis points of additional easing during the 2001 and 2008 recessions, equivalent to a 40-50 percent reduction in mean squared error. This potential forecasting improvement appears to be related to incomplete information about the Fed’s reaction function, particularly with respect to financial stability concerns in 2008. In contrast, having enhanced access to meeting materials would not have improved the market’s policy rate forecasting during tightening cycles.

Read the full article [archived PDF].

World-Watching: Container Shipping Financial Insight, Nov. 2023

[from Drewry Shipping Consultants]

Driven by weak 3Q23 financial results, the Drewry Container Equity Index decreased 3.7% last month (as of 22 Nov 2023). Additionally, asset prices continue to fall due to the supply-demand imbalance.

  • Container shipping companies’ 3Q23 financial results showcased a sharp dip in profits or even losses. On a group level, eleven liners (which report quarterly results) among our portfolio of 13 companies reported an average slump of 54.6% YoY in their 3Q23 topline. Operating costs declined 18.1% YoY amid falling chartering costs and lowering bunker prices. However, the cost reduction was insufficient to offset the plunge in topline; thus, EBIT contracted 94.1% YoY on average.
  • The Drewry Container Equity Index tumbled 28.1% YTD 2023 (ending 22 November), driven by lowering freight rates (WCI: -30.7% in YTD 2023), which squeezed earnings over the quarters. On the contrary, the S&P 500 posted an 18.4% growth. The Drewry Container Equity Index declined 3.4% in the month ending 22 November 2023. Talking about equity prices individually, APMM’s stock price fell 9.0% amid EBIT loss for its Ocean segment in 3Q23, staff cuts and reduced capex guidance, highlighting APMM’s efforts toward reducing costs faced with the bleak industry outlook. Hapag-Lloyd’s stock price slumped 22.2% as its EBIT margin (3Q23: 5.1%) slid below its pre-pandemic level (3Q19: 7.8%). ZIM became the first carrier to report impairment of assets worth USD 2.0bn in 3Q23, and its stock price fell 18.1%. Meanwhile, China-exposed container companies benefitted from the positive sentiment arising from the proposed fiscal stimulus by the Chinese government, possibly boosting the out-of-China and intra-Asia trades. Asian stocks in the broader index rose 2.0% to 19.4% in the month ending 22 November 2023.
  • Mainly driven by weak earnings prospects, the Drewry Container Equity Index trades at a P/B of 0.5x, a 47.5% discount to its pre-pandemic average (2013-19). We expect freight rates to fall sharply in 2024 and increasingly incur losses. Thus, we expect the multiple to remain suppressed.
  • As the fleet of container shipping companies expands, the charter market softens. For instance, 1-year TC rates declined 14.2% and 52.5% YoY in October for vessels sized 1,110 teu and 8,500 teu. Rates declined more for larger vessels as these constitute the majority of the order book and new deliveries. The YoY decline has continued since October 2022, but rates improved slightly during April-May 2023. However, this was not due to the fundamentally strong market but MSC and CMA CGM’s aggressive chartering of vessels to expand their fleets. Now that the two companies have stopped chartering in vessels, the charter market continues to decline.
  • Driven by the softening charter market, second-hand asset prices are also weakening. In October, on a YoY basis, prices for five-year-old vessels (2,700 teu and 7,200 teu) contracted 30.6% and 31.5%, and for 10-year-old ships, prices tumbled between 36.7% and 53.2%. Contrary to the sale and purchase market, newbuild prices (1,500 teu and 14,000 teu) continue to increase and rose by an average of 2.2% YoY, led by a shortage of capacity in shipyards.
  • The charter market and the S&P market have a direct impact on container shipping companies’ earnings. Costs related to chartering-in slots or vessels from other non-operating vessel owners form a significant portion of container shipping companies’ cost structure. In the 3Q23 results, this cost was reduced,
    marginally relieving downside pressure on the operating margin of container shipping companies. In line with the declining charter market, we expect this trend to continue in 4Q23. We also expect other companies to follow ZIM in reporting impairment losses as prices for older vessels continue to fall.

Read the report [archived PDF] for additional graphs.

Economics-Watching: Money Transmitter Regulation: Key to Payments Modernization

[from the Federal Reserve Bank of Atlanta, by Claire Greene, payments risk expert in the Retail Payments Risk Forum]

In October, I wrote about the potential for standards to make business-to-business payments more efficient. Today, let’s talk about standards again, this time for money transfer businesses and the state regulations covering them.

We all know these businesses: Venmo, Western Union, MoneyGram, PayPal, CashApp. The roster seemingly grows by the day. Many crypto firms also are registered money transfer businesses. Money transfer businesses typically are nationwide and global in scope. Nevertheless, these multi-state and multi-national businesses are regulated under the separate licensing rules of individual states and US territories. Federal laws, including the Bank Secrecy Act and the Electronic Fund Transfer Act, also apply to money transfer businesses.

For new and established money transfer businesses and for state regulators, the hodgepodge of state regulations creates headaches. To do business everywhere in the United States, money transfer businesses must register separately in each state and US territory and meet license requirements that can vary from state to state. They can face multiple state examinations, also with different requirements, simultaneously (and annually). During examinations, regulators review operations, financial condition, management, and compliance with anti-money laundering laws.

Fortunately, many states have acted to address this confusing and inefficient situation by adopting the Model Money Transmission Modernization Act (MTMA) [archived PDF], sample legislation developed by the Conference of State Bank Supervisors to establish nationwide standards and requirements for licensed money transmitters. Fourteen states have adopted some version of the MTMA: Arizona, Arkansas, Georgia, Hawaii, Indiana, Iowa, Minnesota, Nevada, New Hampshire, North Dakota, South Dakota, Tennessee, Texas, and West Virginia. In my home state of Massachusetts, the legislature’s Joint Committee on Financial Services heard testimony on a version of this bill just last month. For traditional money transmitters and new fintech entrants, the MTMA aims to reduce the substantive and technical differences among the various state laws and regulations. This kind of change has the potential to reduce compliance burdens, encourage innovation, and remove barriers to entry for new market participants.

The MTMA is important given the prodigious growth in person-to-person, or P2P, payments via apps. Among all US consumers, half of P2P payments were sent using noncash methods in 2022, up from less than 30 percent in 2020 (see the chart). From Massachusetts alone, money transmitters sent $31 billion in 2022, according to the state’s Division of Banks.

Half of P2P payments were made electronically in 2022.

The MTMA also has the potential to create efficiencies for state supervisors. For example, the Conference of State Bank Supervisors (CSBS) has facilitated a collaborative exam program for nationwide payments and cryptocurrency firms to undergo one exam, each facilitated by one state overseeing a group of examiners sourced from across the country. According to the CSBS, transmitters in more than 40 states that have laws addressing core precepts can benefit from the streamlined exams.

The MTMA is another example showing that standards create efficiencies that are good for businesses, good for regulators and, by extension, good for consumers.