Regulatory Pushback Faces X’s In-Stream Payments Plan

Key Insights

• Regulatory Approval: X is struggling to gain regulatory approval for a money transmitter license in New York.
• Concerns Raised: New York regulators are worried about X’s ability to handle money due to staff cuts and Musk’s regulatory history.
• Historical Context: Elon Musk’s vision for an all-in-one app dates back to the early 2000s with PayPal.
• Future Implications: Without New York’s approval, Musk may need to adjust his expectations for X Money.

It seems like Elon’s “everything app” vision is going to take a little longer to come together, with X reportedly having a tough time gaining regulatory approval for a money transmitter license in New York, which is a key state for its “X Money” plan.

According to the new report from The Information, New York regulators have raised concerns about X’s suitability in handling money, due to its drastic staff cuts, its capacity to address potential misuse, and Musk’s own track record of flaunting regulatory processes in other forms.

Elon has regularly challenged whatever structural body stands in the way of progressing his companies’ goals, including the FTC, the SEC, the FAA, basically every government-appointed body responsible for overseeing the rules relating to his various businesses.

Being the richest man in the world would clearly embolden you in this respect, but it’s also now led to increased wariness of such approvals for Elon’s projects, knowing that he’s likely to skirt the rules, where possible, and seek legal recourse to force changes in his favor.

Evidently, that’s at least part of the reason why New York officials are less inclined to grant X a money transmitter license in the state.

Back in May, New York Senator Brad Hoylman-Sigal and Assembly Member Micah Lester published an open letter which called on the New York Department of Financial Services to decline X’s money transmitter application, on the grounds that:

“Musk has engaged in a pattern of reckless conduct, in both business and government, that has put consumers at risk and demonstrated a lack of character and general fitness.”

That, seemingly, is part of what’s prompted the hold-up in approval in New York, while concerns have also been raised about X’s “troubling and deep ties” to the Kingdom of Saudi Arabia, due to Saudi Crown Prince Mohammed bin Salman being an investor in Musk’s X project. The Kingdom of Saudi Arabia, one filing alleges, has a long history of brutality and repression, which it claims “has been fueled and enabled” by the platform itself.

The blockage in New York is a major hold-up for X’s future vision, with X having already been granted money transmitter approvals in at least 38 other states. Because even with those other states, New York remains a key hurdle, and one which even Musk himself has admitted is critical to facilitating the first stage of his X Money push.

X actually withdrew its money transmitter application in New York late last year, and it’s since been working with NY officials to address their concerns. But the latest report from The Information suggests that those talks have not progressed, which leaves Elon’s whole payments and financial dream for the X platform up in the air.

Because, as noted, this is the central element of Elon’s “everything app” vision.

Elon’s original vision for an all-in-one payments/social platform came about back in the year 2000, when he business partner David Sacks mapped out a product strategy for PayPal, where they were both employed at the time. That, conceptually, would transform PayPal into an all-encompassing digital financial platform, but after Elon left PayPal in 2001, the company abandoned the idea, and rolled back several key features.

Elon has remained welded to the concept ever since, even noting that purchasing Twitter was an “accelerant to X”, which revived his concept for an all-in-one financial and engagement app.

So, essentially, payments are the backbone of the whole process. And without it, X is just Twitter, with a few different bells and whistles.

What does that mean for the platform’s growth prospects, and how will Elon maximize its opportunities if he can’t actually build the fully-functioning utility that he envisions?

Really, there are no guarantees that people will warm to X Money anyway, and it’s highly doubtful that a large number of people are going to trust X as their new bank, as Elon hopes.

But if it can’t gain relevant approval in New York, Musk may have to lower his expectations for the app, and scale back its potential as a business entity.

Which would be an extremely tough pill to swallow for the eccentric billionaire, and I can’t imagine that’s going to happen without a significant fight.

Yet, if the reports are correct, X will have to move to a plan B, and develop a new way forward for Elon’s social media project.