This week, the New York Department of Financial Services (NYDFS) informed Elon Musk’s X Money that it cannot continue to pay bank account-like interest on non-bank account deposits of New York residents.
To avoid capital flight from the country’s wealthiest metropolis, X Money offered New York residents a $300 “direct deposit bonus” as “interim compensation,” which it repeatedly insisted “does not constitute APY or interest.”
X Money doesn’t offer bank accounts in New York. Instead, it says it’s a product for New York customers to “earn yield,” “get cashback,” “send wires,” “mail checks,” and “pay your bills,” with “free ATM withdrawals” while “protected with FDIC coverage.”
It holds New Yorkers’ money in a product called a “stored value account” that allows customers to “obtain interest” through September 30 on their money then “earn a $300 bonus” after October 1.
These payouts aren’t any type of bank account interest.
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“X Payments does not take deposits”
The NYDFS approved X Payments as a money transmitter — not a bank in New York — effective July 23. X Money lists its non-bank license number MT-105532 with a July 24 issuance date.
That transmitter license doesn’t turn Musk’s payments arm into a bank. The NYDFS defines money transmitters as businesses that move money for the public.
X Payments’ own license page admits, “X Payments LLC is not a bank.”
Its stored value account terms disclaim, “X Payments is not a bank, is not FDIC-insured, and does not take deposits,” even though the homepage for X Money mentions deposits 16 times.
Despite the legal throat-clearing, X Money promises to credit the $300 “direct deposit bonus” within 14 days of New York residents’ “$3,000 of qualifying deposits,” even though “X Payments does not take deposits,” because a stored value account is not a bank account.
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