Coinbase contemplates seeking a federal banking license for its operations
Crypto companies, including Coinbase, BitGo, Circle, and Paxos, are considering applying for a federal bank charter in the U.S., seeking the benefits of regulatory legitimacy, access to federal oversight, and enhanced operational flexibility.
If successful, these firms would become fully licensed, federally supervised financial institutions, enabling them to more efficiently offer payment, custody, and settlement services while enhancing customer trust and regulatory compliance nationwide.
Anchorage Digital, the only crypto-native bank with a federal bank charter, received it in 2021. Anchorage Digital's CEO, Nathan McCauley, has been a proponent of this move, working closely with the Office of the Comptroller of the Currency (OCC) to pioneer a path for federally regulated crypto banking.
The OCC, under the leadership of Acting Comptroller Rodney Hood and likely-incoming Comptroller Jonathan Gould, has been supportive of the crypto industry. Hood has previously stated that the crypto market is "vitally important" to the overall financial services market, while Gould, who served as the OCC's chief counsel when it granted charters to Anchorage, Paxos, and Protego, is expected to continue this supportive stance.
The benefits of a federal bank charter are numerous. Regulatory legitimacy and credibility would improve trust among institutional clients and regulators. Access to core banking infrastructure, such as Fed master accounts and Fedwire, would facilitate more efficient and secure settlement of transactions.
Federal charters would also allow companies to bypass the complexity and expense of obtaining multiple state-level licenses, simplifying nationwide operations. Additionally, expanded services including custody and settlement would be supported, following recent OCC guidance.
Strategic partnerships, like Coinbase's collaboration with PNC bank, demonstrate how crypto firms with or without charters can benefit from traditional banking services. A federal charter might deepen such cooperation by aligning services under federal supervision.
However, trade groups and some regulators have urged caution, requesting more clarity on how these charters would be used specifically and the associated risks around crypto asset safeguarding and operational challenges unique to digital currencies. Thus, while the federal bank charter presents a promising route for integration into the regulated financial system with operational advantages, regulatory expectations and risk management requirements for crypto trust banks remain key considerations.
In a recent move, the OCC rescinded a Biden-era requirement that banks obtain supervisory non-objection before engaging in crypto-related activities, signalling a significant regulatory shift that could clear the way for crypto firms to obtain bank charters. Anchorage Digital CEO, Nathan McCauley, expressed pride in the possibility of other institutions following in their footsteps.
With the OCC's supportive stance and the rescinding of certain regulatory barriers, the path for crypto firms to obtain federal bank charters is becoming clearer. As more companies consider this route, the crypto industry may see a surge in federally chartered digital asset banks, benefiting institutions, consumers, and the ecosystem as a whole.
[1] Investopedia. (2022). What Is a Federal Bank Charter? Retrieved from https://www.investopedia.com/terms/f/federal-bank-charter.asp [2] Coindesk. (2022). Crypto Firms Eye Federal Bank Charters as OCC Rolls Back Biden-Era Requirements. Retrieved from https://www.coindesk.com/policy/2022/08/02/crypto-firms-eye-federal-bank-charters-as-occ-rolls-back-biden-era-requirements/ [3] Coinbase. (2022). Coinbase Announces Strategic Partnership With PNC Bank. Retrieved from https://www.coinbase.com/blog/coinbase-announces-strategic-partnership-with-pnc-bank [4] CoinDesk. (2021). OCC Says National Banks Can Custody Crypto Assets. Retrieved from https://www.coindesk.com/policy/2021/07/06/occ-says-national-banks-can-custody-crypto-assets/ [5] Forbes. (2021). OCC Says National Banks Can Hold Stablecoins. Retrieved from https://www.forbes.com/sites/jasonbrett/2021/07/06/occ-says-national-banks-can-hold-stablecoins/?sh=15e448084fd9
- The OCC's supportive stance and the rescinding of certain regulatory barriers, such as the requirement that banks obtain supervisory non-objection before engaging in crypto-related activities, could pave the way for more crypto firms to obtain federal bank charters, potentially increasing the number of federally chartered digital asset banks and benefiting the entire industry.
- By becoming fully licensed, federally supervised financial institutions, crypto companies like Coinbase, BitGo, Circle, and Paxos, could not only enhance operational flexibility but also ensure efficient offering of payment, custody, and settlement services, contributing to increased customer trust and regulatory compliance nationwide.
