X Money ordered to halt interest payments in New York, replaces with $300 bonus

This week, the New York Department of Financial Services (NYDFS) notified X Money, the payments arm of Elon Musk, that it can no longer pay interest resembling bank account interest on deposits from New York residents that are not in bank accounts.

In an effort to prevent capital flight from the country's wealthiest city, X Money offered New Yorkers a $300 "direct deposit bonus" described as "interim compensation." The company stressed repeatedly that the bonus "does not constitute APY or interest."

X Money does not offer bank accounts in New York. Instead, it says its product for New York customers allows them to "earn yield," "get cashback," "send wires," "mail checks," and "pay your bills," along with "free ATM withdrawals" and "protected with FDIC coverage."

New Yorkers' money is held in a "stored value account." That product lets customers "obtain interest" through September 30 and then "earn a $300 bonus" after October 1.

These payments are not any kind of bank account interest.

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"X Payments does not take deposits"

The NYDFS granted X Payments a money transmitter license, not a bank license, effective July 23 for New York. X Money shows its non-bank license number MT-105532 with a July 24 issuance date.

That license does not turn Musk's payments business into a bank. The NYDFS defines money transmitters as businesses that move money for the public.

X Payments' own license page states: "X Payments LLC is not a bank."

The terms for its stored value account disclaim: "X Payments is not a bank, is not FDIC-insured, and does not take deposits." Meanwhile, the X Money homepage mentions deposits 16 times.

Despite those disclaimers, 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.